Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
On January 26, 2023, DISH Network Corporation (the "Company") issued $1.5
billion aggregate principal amount of its 11.750% Notes due 2027 (the "Notes")
at an issue price of 102.00% of the principal amount of the Notes. The Notes
were issued as additional notes under a secured indenture (the "Indenture")
dated as of November 15, 2022, by and among the Company, the guarantors named on
the signature page thereto (the "Guarantors") and U.S. Bank Trust Company,
National Association, as trustee (in such capacity, the "Trustee") and
collateral agent (in such capacity, the "Collateral Agent"), pursuant to which
the Company previously issued $2,000,000,000 aggregate principal amount of
11.750% Notes due 2027 (the "Initial Notes"). The Notes form a single series
with, have the same terms as (other than their issue date and price to the
public), and are expected to be fungible for trading purposes with, the Initial
Notes. The Notes have the same CUSIP numbers as the Initial Notes, except that
the Notes issued pursuant to Regulation S will trade separately under a
different CUSIP number until at least 40 days after the issue date of the Notes,
subject to the terms of the Indenture and the applicable procedures of the
depository.
The Notes were sold in a private placement to (1) persons reasonably believed to
be "qualified institutional buyers" in reliance on Rule 144A under the
Securities Act of 1933, as amended (the "Securities Act") and (2) outside the
United States to persons who are not "U.S. persons" (as defined in Rule 902 of
Regulation S under the Securities Act) in compliance with Regulation S under the
Securities Act.
The net proceeds from the offering will be used for general corporate purposes,
including buildout of wireless infrastructure.
The Notes bear interest at a rate of 11.750% per annum and mature on
November 15, 2027. Interest on the Notes will be payable semi-annually on May 15
and November 15 of each year, commencing May 15, 2023, to the holders of record
of such Notes at the close of business on May 1 and November 1, respectively,
preceding such interest payment date. The Notes are the Company's senior
unsecured obligations and are guaranteed by certain of the Company's restricted
subsidiaries on a senior secured basis (the "Secured Guarantors") and certain
other material subsidiaries (the "Unsecured Guarantors"). Pursuant to the
Security Agreement, dated as of November 15, 2022 (the "Security Agreement"),
among the Secured Guarantors and the Collateral Agent, the Notes and the
guarantees of the Secured Guarantors are secured on a first priority basis by
security interests granted to the Collateral Agent, in favor of the secured
parties, in the collateral, which consists primarily of interests in wireless
spectrum licenses within the 600 MHz band (the "Spectrum Collateral") owned by
one of the Secured Guarantors and any additional subsidiaries of the Company
that may be added as guarantors from time to time (the "Spectrum Collateral
Guarantor(s)") and equity interests in the Spectrum Collateral Guarantor(s) and
DISH DBS Corporation. The Notes and the guarantees will rank: (i) equally in
right of payment with all of the Company's and the Guarantors' existing and
future senior indebtedness, including the Initial Notes; (ii) senior in right of
payment to any of the Company's and the Guarantors' subordinated indebtedness;
(iii) effectively senior to any of the Secured Guarantors' unsecured
indebtedness and indebtedness secured by junior liens on the collateral to the
extent of the value of the collateral; and (iv) effectively junior to all the
existing and future obligations of any of the Company's subsidiaries that are
not Guarantors. The Notes will rank effectively junior to the obligations of the
Company and the obligations of the Guarantors that are secured by assets that do
not constitute collateral to the extent of the value of such assets. The
guarantees of the Notes will rank effectively senior to any existing and future
obligations of the Company that are not guaranteed by such Guarantor to the
extent of the value of the guarantee.
The Indenture contains covenants that will limit the Company's ability and, in
certain instances, the ability of certain of the Company's subsidiaries, to,
among other things: (i) incur additional debt; (ii) pay dividends or make
distributions on the Company's capital stock or repurchase the Company's capital
stock; (iii) make certain investments of Spectrum Collateral; (iv) create liens
or enter into sale and leaseback transactions; (v) enter into transactions with
affiliates; (vi) merge or consolidate with another company; and (vii) transfer
and sell assets. These covenants are subject to a number of important
limitations and exceptions and in many circumstances may not meaningfully
restrict our ability to take any of the foregoing actions.
The Company may redeem the Notes, in whole or in part, at any time prior to
May 15, 2025 at a redemption price equal to 100% of their principal amount plus
a "make-whole" premium calculated under the Indenture, together with accrued and
unpaid interest, if any, to the redemption date. At any time on or after May 15,
2025, the Company may redeem the Notes, in whole at any time or in part from
time to time, at the redemption prices specified in the Indenture, together with
accrued and unpaid interest, if any, to the redemption date. The Company may
also redeem up to 40% of the Notes prior to May 15, 2025, at a redemption price
equal to 111.750% of the principal amount of the Notes redeemed, together with
accrued and unpaid interest to such redemption date, with the net cash proceeds
from certain equity offerings or capital contributions (subject to certain
limitations).
The Initial Notes were issued on November 15, 2022, prior to the completion of
an independent appraisal of the Spectrum Collateral. On January 16, 2023, as
required pursuant to the Indenture, the Company delivered to the Trustee a
written certificate certifying that the Company had satisfied the required LTV
Ratio (as defined in the Indenture) as of the date of the independent appraisal,
which was delivered as part of the certificate. Based on the independent
appraisal, the LTV Ratio was not greater than 0.35 to 1.00 and the fair market
value of the Spectrum Collateral was $10.04 billion.
The Company would also be required to obtain a second appraisal of the Spectrum
Collateral (a "Second Appraisal") in the event that (and within 120 days of the
date on which) wireless spectrum licenses that form part of the Spectrum
Collateral accounting for more than 10% of the aggregate MHz-POPs of all such
licenses constituting the Spectrum Collateral are forfeited to the Federal
Communications Commission as a result of the Company's failure to meet its
buildout milestones with respect to such forfeited licenses. If the Company
fails to deliver the Second Appraisal, if applicable, within 120 days following
the date of such forfeiture, then the Company will be required to redeem all of
the Notes at a redemption price equal to 102% of their principal amount, plus
accrued and unpaid interest to, but excluding, the redemption date.
If the LTV Ratio with respect to the Spectrum Collateral as of the date of the
Second Appraisal, if applicable, is greater than 0.35 to 1.00, then within 90
days following the date of the delivery of the Second Appraisal, if applicable,
the Company will be required to add additional Spectrum Collateral Guarantors
and/or pledge (or cause to be pledged) cash or interests in additional wireless
spectrum licenses as Spectrum Collateral to comply with the required LTV Ratio
of 0.35 to 1.00. If the Company fails to add such additional Spectrum Collateral
and/or pledge (or cause to be pledged) cash or interests in additional wireless
spectrum licenses, the Company will be required to redeem an amount of Notes
such that immediately after giving effect to such redemption, the LTV Ratio
shall not be greater than 0.35 to 1.00 at a redemption price equal to 102% of
their principal amount, plus accrued and unpaid interest to, but excluding, the
redemption date.
The Indenture provides for customary events of default, including: nonpayment,
breach of the covenants in the Indenture, payment defaults or acceleration of
other indebtedness, a failure to pay certain judgments and certain events of
bankruptcy, insolvency and reorganization. If any event of default occurs and is
continuing under the Indenture, the trustee or the holders of at least 25% in
principal amount of the then outstanding Notes issued pursuant to the Indenture
(including, for the avoidance of doubt, the Initial Notes) may declare all the
Notes issued pursuant to the Indenture to be due and payable immediately,
together with interest, if any, accrued thereon.
The description set forth above is qualified in its entirety by the Indenture,
which was attached as Exhibit 4.1 to the Company's Current Report on Form 8-K
filed on November 15, 2022, and is refiled herewith as Exhibit 4.1 with a
corrected signature page.
A copy of the Security Agreement was attached as Exhibit 4.2 to the Company's
Current Report on Form 8-K filed on November 15, 2022, and is incorporated
herein by reference.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit No. Description
Exhibit 4.1 Secured Indenture dated as of November 15, 2022, among the Company,
the Guarantors and U.S. Bank Trust Company, National Association, as
trustee and collateral agent.
Exhibit 104 Cover Page Interactive Data File (embedded within the Inline XBRL
document).
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