Dish DBS Corp. credit rating upgraded to ’CCC+’ by S&P Global Ratings

Investing.com -- S&P Global Ratings has increased the issuer credit rating (ICR) for Dish DBS Corp., a subsidiary of EchoStar Corp (NASDAQ:SATS)., from ’CC’ to ’CCC+’. This comes despite the company’s failure to make a subsequent exchange offer to holders of its debt, following a rejected restructuring attempt in November 2024. The rating agency believes that EchoStar has enough liquidity to fund operations for the next 12 months. However, it also forecasts a substantial maturity wall starting in the second half of 2026 that could lead to a restructuring.

EchoStar had about $5.5 billion in cash and short-term investments as of December 31, 2024, following a debt restructuring at Dish Network (NASDAQ:DISH) Corp. It is projected that the company will record a roughly $1 billion free operating cash flow (FOCF) deficit in 2025 and will also need to repay a $500 million term loan at Dish DBS in 2025, likely leaving it with about $4 billion by the end of the year.

The company faces a significant maturity wall in 2026, with $6.2 billion of debt due. This includes $2 billion of unsecured notes at Dish DBS due on July 1, 2026, and $750 million of unsecured notes and $750 million secured notes at Hughes Satellite Systems Corp due on August 1, 2026. Dish DBS also has $2.75 billion of secured notes due on December 1, 2026.

EchoStar could potentially avoid a restructuring in 2026, depending on factors such as the cash burn at Dish Network’s wireless business, the ability to use internal cash at EchoStar Corp. to repay Dish DBS’ and Hughes’ unsecured debt, and EchoStar’s ability to raise the additional debt needed to fund ongoing cash shortfalls at Dish Network Corp.

S&P Global Ratings believes EchoStar could repay the $2 billion unsecured notes at Dish DBS due in July 2026 with cash. However, the company would need to refinance and repay the $750 million secured with new secured notes. Under this scenario, the company would be left with about $600 million of cash in August 2026 and would need external capital of at least $500 million to fund operations for the remainder of 2026 and likely another at least $1 billion to cover the FOCF deficit in 2027.

S&P Global Ratings expects EchoStar’s wireless business to continue to burn cash, resulting in an ongoing need for capital. The wireless business had a cash burn of about $2.8 billion in 2024. The company also has network build-out requirements with the Federal Communications Commission related to its spectrum licenses that require capital expenditure, albeit at a reduced rate of spending.

The ratings agency views the capital structure as unsustainable unless there is a significant improvement in wireless operating trends. The ratings on Dish DBS and Hughes Satellite Systems Corp. are constrained by the parent company, EchoStar Corp., as it is expected that controlling shareholder Charlie Ergen will continue to use these subsidiaries’ financial resources to fund its wireless business.

The negative outlook reflects ongoing FOCF deficits, refinancing risk in 2026, and uncertainty around EchoStar’s ability to successfully penetrate the mature and competitive wireless market. S&P Global Ratings could lower the rating on EchoStar if its liquidity position narrowed over the next year such that a default or distressed exchange is viewed as likely over the next 12 months.

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