Dish Network Corp.’s credit rating could be downgraded if it has to borrow to pay full price now that U.S. regulators denied the company and its partners $3.3 billion in discounts for airwaves, analysts said.
The Federal Communications Commission on Monday said two companies funded by Douglas County-based Dish need to pay the full $13.3 billion price, which might come due even if the case goes to court. The FCC rejected the argument that the two companies are independent.
Dish might seek to fund its bill with additional Dish DBS Corp. paper, pushing the subsidiary’s debt load to about $17 billion, said Stephen Flynn, a Bloomberg Intelligence analyst, in a July 28 note.
Dish’s need to borrow could be lessened if it draws on the $1.1 billion in cash and short-term investments it held as of June 30, Flynn said.
Such a debt load would add about $200 million in interest costs and might lead to downgrades of Dish’s Ba3 rating by Moody’s Investors Service and BB- by Standard & Poor’s, according to Bloomberg Intelligence.
Bob Toevs, a Dish spokesman, declined to comment on the company’s plans or the implications for its credit rating.
The companies have 30 days to challenge its order, or pay, the FCC said. In the decision, the agency said bidding patterns showed “the guiding role of Dish,” and it cited “the unprecedented magnitude” of debt from Dish that funded the companies.
Dish fell 51 cents to $66.68 at 4:30 p.m. in New York trading. The shares have dropped 8.5 percent this year.
If Dish, the No. 2 satellite-TV provider, pays the full amount, it would have airwaves freed of some restrictions the FCC imposes in return for the lower price, Dish Chairman Charlie Ergen told investors Aug. 5. Or it might decide not to pay and abandon the airwaves — after paying a penalty of about 15 percent, Ergen said.
Ergen, who has been amassing airwaves as he positions Dish to offer mobile service, didn’t say which path he would choose.
