Does anyone have bonds in Hughes or Dish which are both $SATS companies? If so, why is the Hughes bond doing so poorly versus the Dish bond? Both mature in 2 years and are throwing off 13% annually, plus a huge gain at maturity - assuming that they are paid off.
In the prospectus, what are the differences between the two bonds? Maybe the Hughes bond has lesser covenants? And that may be why it is trading for a lower price. As time passes with no “event” (in this case “event” means something that could affect the bond), when you get closer to the 2-year mark, they should tend to trade closer to each other as the risk diminishes. Most research notes on the Hughes bonds seem to be worried that because Dish completely controls Hughes (no independent BOD), they can simply take all the Hughes cash and all the Hughes cash flow to support Dish business and Dish bonds.
If any of those bonds pay at maturity, they are GREAT investments. Hughes bonds (8/1/26 6.625%) are trading under 50 right now with a YTM of 47%!!!
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Thanks, that makes sense. However, since Hughes and Dish are owned by the same company at this point it’s doubtful the Hughes bond somehow blows up as the Dish bond gets paid (they both mature in 2 years - one month apart). I’d say they either both get paid or SATS goes BK! I’m in on both bonds so good luck to me.
The way you know the likelihood of a bond defaulting or not is mostly by its price. At this time, the market (that is the aggregate of everyone interested in these bonds) is saying that the Hughes bond is more likely to default than the Dish bond.
As they say in the bond world, “the best rating system is price”.
“the Hughes bond is more likely to default than the Dish bond.”
Except in this case both entities are owned by the same company! It just seems that an all or none scenario will play out - plus SATS will have a huge price to pay if they don’t pay off both.
If they do not payoff they will be in bankruptcy court to work out a settlement. The junk bond rating tells you they do not have the assets to pay. So must either earn the funds or borrow from someone else.
Yeah, but… Being owned by the same company doesn’t mean that they are the same legal entity. Based on the press release put out when Dish was acquired by EchoStar EchoStar Corp Completes Merger with DISH Network | Hughes it appears that Dish is still a separate subsidiary:
As a subsidiary, Dish may have the obligation to pay off it’s own bonds before transferring anything to the parent company to go toward paying off the Hughes bonds. You would have to dig into the merger documents to see if that’s the case. If Hughes bonds are in their own separate subsidiary (I didn’t look for any information relating to that), that subsidiary could declare BK without the parent or Dish doing so.
AJ
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It’s complicated. And you are probably right although how on earth SATS can survive if they don’t pay off the Hughes bond is beyond me. If Hughes bonds go down SATS goes down in my view.
It may be legally possible. Doesn’t mean that it’s a good idea. But I’m not sure SATS would go down. Their reputation and ability to borrow would probably be significantly damaged.
And yet - companies have come back from worse. The current stockholders and bondholders would suffer, but the company and it’s management may be able to continue.
AJ
Even within a single company, with no subsidiaries at all, different bonds have different seniority levels. When the company goes bankrupt, the bonds with higher seniority will receive more of the money than the bonds with lower seniority. Sometimes the lowest seniority bonds get nothing and are wiped out entirely.
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