Can Dish raise more cash?

Dish Network is widely expected to need more money in the coming months. But there's a growing debate about whether the company will be able to raise it.

"We think much of the trust in Charlie Ergen has been lost," wrote the financial analysts at debt research firm CreditSights and Covenant Review, according to Bloomberg. Ergen is the founder and majority owner of Dish and its new parent company EchoStar.

However, in a recent note to investors the financial analysts at New Street Research argued that "we believe Dish could raise more spectrum-backed debt at reasonable yields now."

Dish needs to finance the expansion of its nationwide 5G network to compete directly with behemoths like Verizon, T-Mobile and AT&T. Dish managed to reach its FCC-mandated network-buildout targets in the summer of 2023, but it has since put a halt on most construction efforts as it works to raise more money.

According to Ergen, one thing is clear about where Dish will get funding: "We don't think that selling the spectrum is the right answer," he said at an event this week.

That apparently leaves Dish to consider other, more complex fundraising instruments.

Regardless, Dish continues to trim expenses. The company cut another 150 positions in January, reported FierceWireless.

The new spectrum transaction

Dish recently completed its merger with Ergen's satellite company EchoStar. The newly combined company officially goes by the name of EchoStar, with Dish as a subsidiary. The merger was in part designed to free up some additional cash for Dish's 5G efforts.

Then, earlier this week, EchoStar announced its transfer of certain spectrum licenses to a new holding company, among other moves. The company said the efforts would provide "optimized strategic and financing flexibility" and followed the company engaging outside legal help "in evaluating potential strategic alternatives."

But according to the financial analysts at MoffettNathanson, that spectrum announcement was "inscrutable" and "bewildering."

"Most companies would immediately announce a conference call to explain the news," the analysts wrote in a note to investors. "But EchoStar is not most companies."

On the other hand, the financial analysts at Raymond James described the move as a way to give "the newly combined company additional strategic, financial and operational flexibility."

Rug pulling

According to the Bloomberg report, Dish's latest spectrum transaction essentially moves some of its key spectrum licenses out of reach of its bondholders. That dramatically cuts the value of Dish's existing debt.

"Who as a lender wants to give a company more money if it pulls moves like this?" Mark Levin, a co-founder of the debt advisory firm Asterisk Capital, told Bloomberg.

Bloomberg reported that one group of Dish creditors has already hired investment bank Lazard and law firm Milbank for advice on how to respond to the company's moves. But the publication also noted that other companies with distressed debt have engaged in similar reshuffling efforts.

"These transactions simply add to the fatigue of being a Dish investor," noted CreditSights and Covenant Review.

A path toward securitizing

According to a new report from the financial analysts at New Street, Dish is going to need to raise around $1 billion within the next year or so to continue to fund its operations.

"Securitizing spectrum would be the easiest way to raise capital without impacting their aspirations to be an operator," they wrote.

Securitization involves pooling debt and selling its related cash flows to third-party investors as securities.

Dish has already securitized its 600MHz licenses. Now, thanks to its latest financial move this week, the company is also in a position to securitize additional spectrum licenses including its AWS-4, H-Block, CBRS, 12GHz and millimeter wave holdings.

The AWS-4 angle

The New Street analysts said it makes the most sense for Dish to securitize its licenses that sit in Band 66, which includes AWS-3 and AWS-4 spectrum. Dish's AWS-3 spectrum licenses are owned by its designated entities and are therefore still tied up in a complex and long-running legal spat between Dish and the FCC. The company is using its AWS-4 spectrum in its current 5G network buildout.

Regardless, the New Street analysts wrote that Band 66 has been deployed by Verizon, AT&T and T-Mobile – which means Dish's AWS-4 licenses could be worth up to $17.6 billion. They noted that Dish should be able to borrow around $6.2 billion against those AWS-4 licenses, based on the parameters Dish received on its 600MHz securitization.

However, such estimates are just that. For example, New Street calculates that Dish's total spectrum portfolio is worth close to $60 billion. The financial analysts at Raymond James estimate it's worth less than half that.

And what if Ergen changes his mind about an outright sale of spectrum? Under Dish's 2019 agreement with T-Mobile and the US Department of Justice, Dish is prevented from selling its AWS-4 and 600MHz licenses until April 2026.

"The ideal time to sell would be mid-2026, when the national carriers will have more balance sheet capacity and regulatory factors that could complicate a sale will have lapsed," New Street noted.