Dish DBS, DirecTV bonds pop on news of revived merger talks

Bonds backing Dish DBS Corp. and DirecTV Holdings LLC surged in early trading on reports that the two have resumed talks about a merger that Dish Network chief Charlie Ergen once described as "inevitable."

Dish Network and DirecTV have been endeavoring to merge their pay TV businesses for close to 20 years but have been thwarted by the Federal Communications Commission, the Justice Department's antitrust unit and more recently the Department of Justice. But the New York Post in a Jan. 11 report quoted inside sources as being "optimistic a Dish-DirecTV deal could pass regulatory muster as concerns about the market power of the struggling companies have waned."

To be sure, subscriber numbers at DirecTV have fallen to just over 15 million from more than 25 million in 2017, according to company filings, while Dish now has 8.4 million subscribers, down from more than 13 million.

Dish DBS' 5.125% senior unsecured notes due 2029 posted the biggest gains, advancing 4.5 points to 93.5 on the highs, for a yield of about 6.236%. Those bonds hit an all-time low just below 88 amid a broad-market slump in November 2021 and again on Jan. 10, with yesterday's news arresting the latest price slide. The borrower's other outstanding bonds were about 1-1.625 points higher on the day, including two tranches of secured notes placed in November. Inked to fund spectrum purchases, the latter offerings raised consolidated debt to EBITDA at parent Dish Network Corp. to over 7x, prompting S&P Global Ratings to downgrade the entity to B- while affirming the same rating for Dish DBS and assigning a B+ rating to the new notes.

DirecTV Holdings' 5.875% secured notes due August 2027 were up 1.625 points in early action, to a recent high of 103.625. The notes fell below 101 for the first time in mid-November. The company on Dec. 6, 2021, tacked on another $1.4 billion of the bonds in support of its separation from AT&T. Ratings considered the move leverage neutral, noting in a Dec. 6 report that the stand-alone unit's operating performance had begun to demonstrate early signs of improvement following its July 2021 spinoff.