The second-largest satellite TV operator in the U.S.,
DISH Network Corp.
) subsidiary, DISH DBS Corporation, plans to offer senior notes
worth $2.5 billion subject to market and other conditions. This
is the second debt sale by DISH in the last six weeks after it
raised $2.3 billion from the market in Apr 2013.
Initially, the net proceeds will be placed in an escrow
account and will be released only to finance a portion of the
cash consideration for its proposed $25.5 billion takeover of
). The notes will only be offered and sold to qualified
Institutional buyers and will not be registered under securities
act or the securities law.
In Oct 2012, Japan's SoftBank Corp. proposed to buy 70% of
Sprint's stake for a total consideration of $20.1 billion.
However, DISH Network outbid SoftBank's proposal by making a
counter offer to completely acquire Sprint for $25.5 billion.
DISH has offered $7 for each Sprint share, which includes $4.76
in cash and 0.05953 shares in DISH.
Recently, DISH announced that it plans to raise $9 billion in
debt to fund the acquisition and this$2.5 billion debt offering
is part of that plan. However, if the acquisition does not
complete before the escrow end date, DISH DBS will redeem all of
the $2.5 billion notes.
The Sprint acquisition will generate positive synergies for
both the companies in terms of countering stiff competition from
market leaders like
Verizon Communication Inc.
), which dominate nearly 35% of the U.S. market. However, DISH
has to overcome a lot of regulatory hurdles and challenges from
Softbank before completing the acquisition.
DISH exited the first quarter of 2013 with an enormous $11.3
billion in long-term debt and $7.1 billion in cash. So, further
issue of debt will increase the financial risk for the company in
terms of higher interest payments and increased leverage.
In the next five years, senior notes worth $4.7 billion will
mature for DISH. Moreover, a debt of $500 million will be due in
the current year. Hence, we believe that the constant maturity of
debt during the next five-year period will not only affect DISH
Network's cash position but will also impact its future plan to
rollout mobile broadband network across its footprint.
DISH currently carries a Zacks Rank #5 (Strong Sell).
DISH NETWORK CP (DISH): Free Stock Analysis
SPRINT NEXTEL (S): Free Stock Analysis Report
AT&T INC (T): Free Stock Analysis Report
VERIZON COMM (VZ): Free Stock Analysis Report
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