EchoStar Corp saw the largest proportional increase in notional debt outstanding in the technology sector in 2024, with a 509% increase, taking it to US$7.64 billion of debt year-on-year (YoY), up from US$1.5 billion at the start of the year, based on Risky Finance data.
That size of notional change put it firmly between the leader Broadcom (US$9.1 billion change in notional, +24% YoY) and third place Hewlett Packard (US$6.5 billion, +107%, YoY).
EchoStar’s situation was precarious last year, with reports by analysts and commentators suggesting it was at risk of bankruptcy, with Morningstar analyst Michael Hodel noting in August 2024 “The firm faces a highly uncertain future as it seeks to carve out a niche. More critically, it is rapidly running out of time to secure the financing needed to remain viable.”
A potential deal with AT&T and TPG-backed DirecTV to acquire EchoStar’s Dish Network Corp fell through in November, after holders of Dish’s distressed debt declined to accept a haircut on their holdings that was needed to accept the deal.
Analysis of the firm’s debt by Morgan Stanley in December, entitled “Defying Gravity”, noted that the debt raised over the year gave EchoStar three years of cashflow to support the build-out of its wireless business, which Hodel had noted described as a “massive bet on wireless spectrum, spending about US$30 billion (more than US$100 per EchoStar share) to acquire various spectrum licenses over the past 15 years.”
“The lack of significant progress on the wireless business build-out wasn’t an insurmountable hurdle for EchoStar to raise US$5.8 billion of new money,” wrote David Hamburger, Fernanda Lima and Juliana Gonzalez, credit analysts at Morgan Stanley. “In our view, the successful capital raise benefited from a supportive market environment and increasing investor comfort with spectrum valuations as the new notes are backed by advanced wireless services (AWS)-3 and -4 licenses.”
The refinancing of US$2 billion of Dish debt with a November maturity had been supported by the prospect of the DirectTV merger, they noted.
“[It] was a catalyst for parties to commit US$2.5 billion in TLs at an unrestricted DBS subsidiary,” the analysts wrote. “Although the merger was terminated, the financing remains in place. However, we think the outlook for DISH DBS now largely rests on the prospect of pay-TV consolidation and the ongoing bondholder litigation contesting the asset transfers earlier this year, for which we think there appears to be compelling arguments by both parties.”
Meanwhile, fierce competition will remain across broadband and satellite revenues in the technology space, being fought over by Elon Musk’s Starlink – with his SpaceX business owning two thirds of all satellites in orbit – while Amazon’s Project Kuiper and Apple’s partnership with Globalstar also creating a highly contested market.
©Markets Media Europe 2024
