EchoStar ‘s proposed deal to sell Dish Network to DirecTV — for $1 cash and the assumption of $9.75 billion in debt — is akin to Dish defaulting on its debt securities, according to credit-rating agency S&P Global.

As part of the agreement, Dish DBS declared a “unfavorable exchange offer” for various tranches of its debt totaling around $10 billion, S&P noted. Additionally, Dish Network Corp. announced an offer to exchange $4.9 billion convertible notes for new securities alongside $5.1 billion of committed new money notes being issued.

“We view these transactions as tantamount to a default because investors will receive less value than the promise of the original securities,” S&P said in a note Tuesday. “Holders of existing Dish DBS notes are being offered less than the original promise because the exchange rate as part of the mandatory exchange consideration into new DirecTV issuer notes is at a significant discount to par for most issues and the maturity dates will be extended.” The credit-rating agency added that in exchange the new notes will carry a higher rate of 8.875% and be secured by assets of the combined businesses of DirecTV and Dish.

Representatives for Dish and DirecTV did not respond to requests for comment.

Following the announcement of the deal, S&P downgraded the issuer credit rating on Dish DBS and Dish Network from “CCC-” (indicating “a default, distressed exchange, or redemption appears to be inevitable within six months”) to “CC” (which signifies an obligation “currently highly vulnerable to nonpayment”). The “negative outlook on Dish DBS and Dish Network reflects that we will lower the [issuer credit rating] to ‘selective default’ and the issue-level ratings on the affected issues to ‘D’ [‘default’] if it finalizes the exchange as proposed.”

Meanwhile, the credit rating firm revised the outlook on EchoStar and sister company Hughes Satellite Systems to positive, indicating that “we could raise” issuer credit ratings to “CCC+” after the completion of the Dish Network transactions “based on an improved liquidity position at EchoStar.” That said, according to S&P, the rating upside on EchoStar is likely limited to “CCC+” due to “wireless cash burn, execution risk, and uncertainty of EchoStar’s long-term wireless earnings growth.”

As part of the DirecTV-Dish transaction, TPG Angelo Gordon (TPG’s investment unit specializing in credit and real estate investing) and some of its co-investors, alongside DirecTV, provided $2.5 billion of financing to “completely refinance” the Dish TV business’ November 2024 debt maturity of $2 billion. Furthermore, Dish supporting lenders have pledged $5.1 billion in fresh capital in the form of 10.75% spectrum-backed secured notes maturing in 2029 (secured by AWS-3 and AWS-4 spectrum assets and contingent on the proposed Dish Network exchange finalizing, which necessitates 90% participation). Additionally, EchoStar entered into agreements with specific investors for an equity issuance at an aggregate purchase price of roughly $400 million.

Also on Monday, AT&T revealed it will divest its 70% ownership in DirecTV to TPG, the private-equity firm that already held a 30% stake in the operator, for $7.6 billion. AT&T had acquired DirecTV in 2014 and three years ago separated the satellite TV operator , maintaining a majority ownership interest.

If the DirecTV acquisition of Dish goes through — once it receives regulatory approvals, which analysts expect to occur — the merged entity would possess approximately 18 million subscribers , making it the No. 1 U.S. pay-TV provider. However, that subscriber number is down 63% from peak levels in 2016 for DirecTV and Dish, the companies stated.