Dish Says $1 Billion Debt Offering May Fund Transactions

A unit of Dish Network Corp. (DISH), the third-largest U.S. pay-TV provider, said it will seek to raise $1 billion in debt for purposes that may include wireless transactions or acquisitions of airwaves.

Dish is seeking to forge a partnership or acquire a company in the wireless industry to add mobile capabilities to its satellite-TV product. The company made an offer to buy all of Clearwire Corp. (CLWR)’s outstanding shares for $3.30 each on Jan. 8. Clearwire said last month it’s still weighing that offer as well as a $2.97-a-share bid from Sprint Nextel Corp. (S)

“Dish’s first preference is probably to buy some divested spectrum as part of a Clearwire deal with Sprint,” Shing Yin, an analyst at Guggenheim Securities LLC in New York, said in an interview. “If that doesn’t happen, maybe Dish considers PCS or T-Mobile.”

The senior notes will be offered through subsidiary Dish DBS Corp., the company said today in a statement. Dish DBS intends to issue five- and seven-year securities, according to a person familiar with the offering who asked not to be identified because terms aren’t set.

Dish also unsuccessfully bid to acquire MetroPCS Communications Inc. (PCS) for about $4 billion in August, according to company filings. MetroPCS and Deutsche Telekom AG (DTE)’s T-Mobile USA Inc. agreed to merge in October, although the transaction must pass a shareholder vote on April 12.

MetroPCS Signal?

Today’s offering can be interpreted as a signal that Dish could make a competitive bid for MetroPCS if the merger with T- Mobile is voted down by shareholders, Tim Farrar, an analyst with TMF Associates Inc. in Menlo Park, California, said in an interview.

“Dish wants to use MetroPCS as leverage to get to T-Mobile because Dish needs a national network,” Farrar said. “Buying MetroPCS would be a message to T-Mobile that it’s so screwed it needs to do a deal with Dish on Dish’s terms.”

Dish, based in Englewood, Colorado, raised an additional $1.5 billion in debt in December, an offering that also could also be used for “spectrum-related strategic transactions,” according to a company filing. Those 5 percent notes are due in 2023.

Negative Outlook

Dish’s credit profile has “weakened considerably” through last year with rising debt levels helping to limit the company’s financial flexibility at its current rating, David Peterson, an analyst at Fitch Ratings, said today in a report that ranked the new debt BB- with a “negative” outlook. The rating is three levels below investment grade.

That outlook “encompasses the lack of visibility as well as the potential capital and execution risks associated with Dish’s wireless strategy,” Peterson said.

Lending Dish more money without more clarity on the company’s options is “dangerous,” according to Chris Ucko, an analyst at CreditSights Inc.

Owning Dish shares instead of debt is a safer option because with the stock, “interests are more closely aligned” with those of co-founder and chairman Charlie Ergen, Ucko said in a report. Ergen is Dish’s controlling shareholder.

Dish was little changed at $38.07 at the close in New York. The shares have gained 4.6 percent this year, as the Standard & Poor’s 500 Index has risen 10 percent.

To contact the reporters on this story: Alex Sherman in New York at asherman6@bloomberg.net; Charles Mead in New York at cmead11@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net

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