EchoStar/Dish raises doubts about ‘ability to continue as a going concern’

The financial situation at EchoStar/Dish Network looks dim, as the newly combined entity issued an ominous warning via this SEC filing that raises “substantial doubt” that the company can continue as a going concern.

EchoStar and Dish merged last year, combining Dish’s satellite, streaming, retail wireless business and emerging 5G network with EchoStar’s satellite-focused business. The move was partly aimed at freeing up cash for Dish’s 5G network buildout.

With debt maturing in 2024 and expectations that the company will burn a “substantial amount of cash” in the next 12 months, it “raises substantial doubt about [the company’s] ability to continue as a going concern,” EchoStar/Dish explained in the filing.

EchoStar/Dish ended 2023 with $2.4 billion in cash and cash equivalents and marketable investment securities, along with $951 million and $1.98 billion of debt maturing in March and November 2024, respectively. Dish said it intends to use cash on hand and cash flow from operations to pay the March 2024 debt maturity, but warned that it does not have the necessary cash on hand and/or projected future cash flows to fund the November 2024 debt maturity “and subsequent interest on our outstanding debt.”

EchoStar/Dish also said it can’t provide assurances that it will be successful in obtaining new financing or restructuring of existing debt obligations, putting its 5G plans in jeopardy. Dish said it may not have the capital “to meet future FCC build out requirements and wireless customer growth initiatives,” leaving those plans “adversely affected.”

But EchoStar/Dish isn’t without options. New Street Research believes EchoStar could raise about $3.2 billion of spectrum-backed notes from its DBSD and Terrestar holdings, and raise an additional $4.3 billion against AWS-3 licenses.

“Taken together, this should provide enough liquidity to deal with the converts and close the funding gap while also accelerating the network deployment and investing in subscriber acquisition at Boost,” New Street analyst Jonathan Chaplin wrote in a research note just ahead of the release of EchoStar’s Q4 results.

“We believe there is a deal that would be acceptable to Dish Network Corp bondholders that would reduce total debt outstanding, push out maturities, and provide access to additional capital … Getting to that deal will be no trivial matter though,” Chaplin added in a follow-up note issued today.

‘Unrealistic’ to expect a turnaround

MoffettNathanson analyst Craig Moffett offered a blunt assessment of the company’s future based on Dish’s deteriorating pay-TV and mobile subscriber customer base: “Dish’s business is spiraling towards bankruptcy. Gradually, then all at once, the declines are gathering speed,” he wrote in a research note (registration required) issued today.

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