Dish Credit-Default Swaps Jump on Speculation of T-Mobile Bid
January 13, 2012, 6:01 AM ESTBy Mary Childs
Jan. 11 (Bloomberg) -- The cost to protect against losses on Dish Network Corp. debt jumped on speculation that the satellite-television company may be considering a bid for T- Mobile USA.
Credit-default swaps on Englewood, Colorado-based Dish climbed 30 basis points to 360 basis points as of 10:27 a.m. in New York, according to broker Phoenix Partners Group. That’s the biggest jump since Oct. 4, according to data provider CMA.
After regulatory opposition killed Deutsche Telekom AG’s sale of T-Mobile to AT&T Inc. on Dec. 19, speculation that Dish might be interested in acquiring T-Mobile has been “rather rampant,” according to Dave Novosel, an analyst at bond researcher Gimme Credit LLC in Chicago. Dish could partner with T-Mobile or another wireless company to create a strengthened competitor to AT&T and Verizon Wireless, Chief Executive Officer Joseph Clayton said last month.
While a deal wouldn’t be “inconsistent with the recent moves they’ve made,” Novosel said “the nature of the deal makes some sense, but the size of the deal precludes something from happening.”
Aaron Johnson, a spokesman for Dish, didn’t immediately return a voicemail message seeking comment on the bond and credit-default swap moves.
Dish’s underperformance relative to DirecTV, the largest U.S. satellite-television provider is pushing the company to adjust its strategy, Novosel said in a telephone interview today.
Sacrificing Balance Sheet
“AT&T had plenty of financial flexibility to borrow against its balance sheet whereas Dish doesn’t have nearly the flexibility; one because it just has higher leverage, and two it’s a much smaller company,” Novosel said. “I don’t think Dish would be willing to sacrifice its balance sheet for an acquisition of this nature.”
Dish’s $2 billion of 6.75 percent notes due 2021 dropped two cents on the dollar to 106 as of 10:39 a.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
Dish and Google Inc. submitted a bid for T-Mobile, SNL Kagan said yesterday, citing unidentified sources.
Credit-default swaps tied to Dish’s debt, which typically rise as perceptions of creditworthiness deteriorate, are down from 551.5 basis points on Oct. 4, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.
Credit swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt.
--With assistance from Alex Sherman in New York. Editors: John Parry, Shannon Harrington
To contact the reporter on this story: Mary Childs in New York at mchilds5@bloomberg.net
To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net
