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18.05.12

May 8 - Fitch Ratings has assigned a 'BB-' rating to DISH DBS Corporation's (DDBS) issuance of 4.625% senior notes due 2017 and 5.875% senior notes due 2022. DDBS is a wholly owned subsidiary of DISH Network Corporation (DISH, Fitch Issuer Default Rating of 'BB-'). Proceeds from the offering are expected to be used for general corporate purposes. DISH had approximately $7.5 billion of debt outstanding as of March 31, 2012. The Rating Outlook is Negative. The Negative Outlook encompasses the capital and execution risks associated with DISH's wireless strategy. While DISH has yet to fully articulate its wireless strategy, the company has committed over $3.5 billion of capital to acquire wireless spectrum. Fitch believes the incremental capital and operating costs associated with a potential wireless network build out will diminish DISH's ability to generate free cash flow, erode operating margins resulting in a weaker credit profile and pressuring the current ratings. Fitch believes the business risk inherent in launching a wireless business limits the flexibility the company has to increase leverage at the current ratings to accommodate the incremental capital costs and EBITDA erosion associated with the launch of a wireless network. Construction of a stand alone wireless network would have additional negative rating implications. DISH closed on its acquisitions of the reorganized DBSD North America, Inc. and substantially all of the assets of TerreStar Networks, Inc. following receipt of regulatory approval from the Federal Communications Commission (FCC or commission). However, the FCC denied DISH's request to waive its ancillary terrestrial component (ATC) integrated service rule and spare satellite requirement. The FCC adopted a Notice of Proposed Rule Making (NPRM) on March 21, 2012 to set rules for the terrestrial use of S-band mobile satellite service (MSS) wireless spectrum (re-designated as AWS - 4 band). The NPRM, if adopted without significant modifications, does not appear to be overly restrictive or carry onerous terms for DISH. The proposed build-out requirements included in the NPRM seem reasonable in Fitch's view and allows for sufficient flexibility in terms of the timing of capital requirements to build its network. Fitch notes that the NPRM proposes to automatically terminate AWS - 4 license authorizations in the event the license holder fails to meet the build-out requirement. In addition the FCC chose not to apply any eligibility restrictions on the AWS - 4 band providing the license holder (DISH currently) flexibility to sell/lease network capacity to another wireless operator or sell the spectrum itself without counter-party restrictions. Moreover the NPRM is void of any discussion or proposal related to potential wind-fall tax or other fee for permitting the terrestrial use of the AWS - 4 band. Fitch believes the company's overall credit profile is relatively strong within the current rating category considering the business risks attributable to DISH's core operations and the current rating has sufficient flexibility to accommodate DISH's inconsistent operating performance. However, DISH has one of the weaker competitive positions within the multi-channel video programming distributor sector, in Fitch's opinion. DISH's market positioning as a low cost and value service provider is not sustainable as all market participants are aggressive with promotional offers in an increasingly mature video service industry. DISH is in the process of re-positioning its brand away from a value proposition to a more technology and product focus. DISH's challenge is to re-energize subscriber growth without sacrificing subscriber economics (arguably already weak) or credit quality. Key to a successful transition will be the company's ability to reduce churn while introducing new products and services valued by subscribers that are not easily replicated by competition. DISH gained approximately 104,000 subscribers during the first quarter largely due to a 12 basis point improvement in subscriber churn. DISH has lost approximately 120,000 subscribers during the last 12 month period ended March 31, 2012. DISH's credit profile has remained stable notwithstanding the inconsistent operating performance. Total debt as of March 31, 2012 was approximately $7.5 billion, relatively consistent with the debt level as of year-end 2011. DISH's leverage was 2.16x on an LTM basis as of March 31, 2012, which is consistent with year-end 2011 measures and strong for the rating category. Pro forma for the issuance, DISH's leverage was 2.7x as of March 31, 2012. Absent further investment supporting the company's wireless strategy or shareholder friendly initiatives, Fitch expects DISH's debt level will remain consistent and for leverage to approach 2.5x by year-end 2012. The company's liquidity position is strong and supported by cash and marketable securities on hand and expected free cash flow generation. The company also benefits from a favorable maturity schedule as the next scheduled maturity is in 2013 totaling $500 million. As of March 31, 2012, DISH had a total of nearly $2.7 billion of cash and marketable securities (current portion) - reflecting a 32% increase compared with liquidity measures as of Dec. 31, 2011. Fitch notes that during the fourth quarter of 2011, DISH used approximately $915 million of existing cash to redeem its 6.375% notes due 2011 and used an additional $892 million to fund the special dividend paid to DISH shareholders on Dec. 1, 2011. Fitch does note, however, that the company does not maintain a revolver, which increases DISH's reliance on capital market access to refinance current maturities, elevating the refinancing risk within the company's credit profile. The risk is offset by the company's consistent access to capital markets and strong execution. DISH generated nearly $690 million of free cash flow (defined as cash flow from operations less capital expenditures and dividends) during the first quarter of 2012 following $902 million of free cash flow during all of 2011. Fitch expects capital intensity will be relatively consistent over the near term and that capital expenditures will continue to focus on subscriber retention and capitalized subscriber premises equipment. Absent further investment in a wireless network or other strategic initiative, Fitch anticipates that DISH will continue generating relatively stable levels of free cash flow during the current ratings horizon while incorporating higher levels of cash taxes. Rating concerns center on DISH's ability to adapt to the evolving competitive landscape, DISH's lack of revenue diversity and narrow product offering relative to its cable MSO and telephone company video competition, and an operating profile and competitive position that continues to lag behind its peer group. DISH's current operating profile is focused on its maturing video service offering and lacks growth opportunities relative to its competition. The ratings also incorporate Fitch's belief that DISH's satellite based infrastructure can put the company at a competitive disadvantage, relative to the cable MSO and telephone company's respective technology and network positions, as video content is expected to be increasingly consumed over alternative platforms and devices such as wireless (4G) and higher-speed broadband networks. Stabilization of the Outlook at the current rating level can occur as the company demonstrates that it can execute its wireless strategy in a credit neutral manner. Fitch believes negative rating action will likely coincide with the company's decision to execute a wireless strategy or other discretionary management decisions that weaken the company's ability to generate free cash flow, erode operating margins and increase leverage without a clear strategy to de-lever the company's balance sheet.

Source: Reuters 18.05.12

Montgomery County is still rich. Still a corporate center. Still a place with relatively low property taxes, by suburban standards.

But it’s a little less perfect than it used to be, according to Wall Street.

On Tuesday, Fitch Ratings cut the credit rating on bonds Montco wants to refinance to AA+, down a notch from its former top-level AAA. In a report by analyst Eric Friedman, Fitch blamed it on the “sizable decline in the county’s general-fund balance following several years of large operating deficits,” to less than 7 percent of its $400 million-plus budget — less than a AAA community should have on hand to cover emergencies, unless it cuts more services or boosts taxes.

Source: Philadelphia Inquirer 18.05.12

Average U.S. rates for 30-year and 15-year fixed mortgages fell to fresh record lows this week, offering more incentive for Americans to buy or refinance homes.

Mortgage buyer Freddie Mac said Thursday that the rate on the 30-year loan fell to 3.84 percent, the lowest since long-term mortgages began in the 1950s. That's below the previous record rate of 3.87 percent reached in February.

Source: New York Daily News

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