(DISH) Dish Network Corporation Sees Possible Credit Downgrade by Moody’s

Credit rating agency, Moody’s Investors Service has put the U.S. based satellite service provider, Dish Network Corp. (DISH) on review for a possible downgrade. This decision by the agency is in response to DISH’s proposal to acquire Sprint Nextel Corp. (S), the third-largest wireless carrier in the U.S., for $25.5 billion.

DISH has proposed to pay $7 per share, which includes $4.76 in cash and 0.05953 of DISH share for every Sprint share. This recent offer from DISH counters Japanese telecom carrier, SoftBank Corp.’s bid to buy 70% of Sprint’s stake for a total consideration of $20.1 billion.

Currently, DISH Network holds a Ba2 corporate credit rating from Moody’s, which places the third-largest U.S. satellite provider into junk category. Moody’s has announced that it will evaluate the strategic synergies and the related growth opportunities for DISH from the acquisition, before assigning any outlook on the company.

The rating firm also said that it will scrutinize the financial risk of DISH from the acquisition, which includes assessing the leverage and liquidity position of the standalone company as well as that of the combined DISH-Sprint entity. Shareholders reacted negatively as the stock fell 1.6% in the aftermarket trade on Tuesday to close at $37.32.

If downgraded, this will be the second major setback for the company in quick succession as recently Standard & Poor’s Rating Services (S&P) lowered its outlook on the company to Stable from Positive. The rating agency cited growing leverage of DISH coupled with uncertainty related to its wireless venture, as the primary reasons for this downgrade.

DISH Network argued that the proposed acquisition will allow it to provide triple-play services by combining its satellite network with Sprint’s wireless network. Additionally, it will be able to counter stiff competition from market leaders AT&T Inc. (T) and Verizon Communication Inc. (VZ), which dominate nearly 35% of the U.S. market.

However, DISH already possesses a highly leveraged balance sheet and fiscal 2012 with an enormous $11.6 billion in long-term debt. Recently, DISH Network raised $2.3 billion debt from the market.

The acquisition will further aggravate its debt position to $27.7 billion, which will increase the financial risk for the company in terms of higher interest payments and increased leverage. We believe that accessing the debt market to fund the acquisition might worsen its leverage position further, which in turn might affect its ratings.

Currently, DISH Network has a Zacks Rank #3 (Hold).
DISH NETWORK CP (DISH): Free Stock Analysis Report

SPRINT NEXTEL (S): Free Stock Analysis Report

AT&T INC (T): Free Stock Analysis Report

VERIZON COMM (VZ): Free Stock Analysis Report

To read this article on Zacks.com click here.

About vitalstocks

This is a sample profile field. Vitalstocks is the operating company for Stockbloghub. This will place the picture of the author or company in the profile. Here is another extra line of information.

Comments

Powered by Facebook Comments


Similar Posts: | | | | | | | | CATV Systems | Services

RSS feeds: AT&T Incorporated | DISH | Dish Network Corporation | S | Sprint Nextel Corporation | T | Verizon Communications Inc. | VZ | CATV Systems | Services |

Other Posts by | RSS Feed for this author