Fitch Rates DIRECTV's Proposed Senior Secured Debt Offering 'BB+'/'RR2'

Published: 2026-05-12 06:51:17 ET CHTR

Published on 05/12/2026 at 06:51 am EDT

Fitch Ratings has assigned DIRECTV Financing, LLC's (DIRECTV) proposed $1,400 million senior secured notes due 2032 a 'BB+' rating with a Recovery Rating of 'RR2'.

The senior secured notes are issued by DIRECTV Financing, LLC and co-issued by DIRECTV Financing Co-Obligor, Inc. The net proceeds will be used to fund a tender of the 2027 senior secured notes in part.

The ratings reflect the company's scale as one of the largest multi-channel video programming providers in the U.S., its strong cash flows and its conservative leverage profile. Concerns include the continued, industry-wide secular pressure on providers of traditional linear television as consumers shift a material portion of their video consumption to a variety of over-the-top (OTT) streaming services.

Key Rating Drivers

Declining Industry Trends: Shifting consumer preferences and technology changes have reduced subscribers to traditional linear television, including satellite pay TV. The video industry has rapidly evolved over the last few years, with direct to consumer (DTC) platforms such as Netflix, Amazon and Disney+ amassing significant subscribers. This has led to large declines in subscribers among traditional video distributors. In addition, the growth in broadband accessibility and speeds makes it easier for OTT platforms to provide streaming services.

Conservative Leverage: Fitch calculates EBITDA leverage of approximately 2.0x at YE 2025. Leverage increased in 2025, largely due to the additional debt to fund the dividend payment to AT&T and TPG and continued decline in EBITDA. DIRECTV's ratings reflect its commitment to remain conservatively capitalized within its stated target net leverage of 1.5x in the medium term.

EBITDA Margin Pressure: Declining revenue due to subscriber losses has placed pressure on margins over the past several years. Management continues to implement cost cuts to offset these declines, and newer product offerings have lower expenses, but Fitch expects EBITDA margins to be pressured through the forecast period.

Financial Flexibility: Fitch expects free cash flow (FCF) in excess of $1 billion a year after tax distributions. Fitch assumes slightly higher capital expenditure (capex) for potential satellite replacements by the decade's end. FCF is supported by low capex intensity of 2.5% to 3.5% and a shifting product mix. DIRECTV via Internet and DIRECTV Stream have lower subscriber acquisition costs. The equipment cost is lower, and the product generally does not require a truck roll, as customers can self-install the equipment. Fitch also expects continued dividends on common equity to TPG if DIRECTV remains within its stated leverage target range.

Material Scale: DIRECTV's video subscriber base is the third-largest traditional multi-channel video programming distributor (MVPD) in the U.S. with about 8.2 million subscribers at the end of 1Q26. It follows Charter Communications, Inc. with about 12.5 million and Comcast Corp. with about 10.9 million video subscribers. All three have materially less scale than five years ago. DIRECTV remains the largest standalone traditional video provider but has no broadband or other operations, like its peers. Scale is crucial for MVPD operators, as it provides greater negotiating power with content providers and TV broadcasters, helping to manage costs amid secular pressures.

Peer Analysis

DIRECTV's publicly rated MVPD peers include Comcast Corp. (A-/Stable) and Charter Communications, Inc. (Charter; BB+/Rating Watch Positive). Comcast is rated higher than DIRECTV primarily due to significantly greater revenue and segment diversification. With roughly 8.2 million subscribers through the DIRECTV satellite TV, DIRECTV Stream, DIRECTV via Internet and U-verse offerings, DIRECTV is the third-largest U.S. MVPD behind Comcast and Charter.-

However, Fitch believes DIRECTV is more weakly positioned because of its less competitive product offering. This has disadvantaged it relative to MVPD peers, which benefit from their ability to use bundling (mainly broadband services) to retain video subscribers. Charter's ratings also benefit from segment diversification, scale and higher FCF, which is balanced against higher-leverage metrics (low 4.0x) compared to DIRECTV's metrics.

Fitch's Key Rating-Case Assumptions

Revenues decline in the mid to high single digits over the forecast period, primarily due to declines in DIRECTV satellite subscribers and U-Verse subscribers, partly offset by growth in DIRECTV Internet and higher average revenue per user (ARPUs);

EBITDA margins in the low- to mid-20% range;

Fitch-calculated CFO margin in the high teens over 2026-2028 with capex intensity of 2.5% to 3.5%;

Fitch assumes that the company applies discretionary cash flow beyond the term loan amortization to additional debt repayments to improve leverage toward its 1.5x net leverage target.

Corporate Rating Tool Inputs and Scores

Fitch scored the issuer as follows, using our Corporate Rating Tool (CRT) to produce the Standalone Credit Profile (SCP):

Business and financial profile factors (assessment, relative importance): Management (bbb-, Lower), Sector Characteristics (bb+, Lower), Market & Competitive Positioning (b+, Higher), Diversification and Asset Quality (bb+, Moderate), Company Operational Characteristics (bbb, Moderate), Profitability (bb, Higher), Financial Structure (a, Moderate), and Financial Flexibility (bb+, Moderate).

The quantitative financial subfactors are based on custom CRT financial period parameters: 10% weight for the historical year 2024, 35% for the forecast year 2025, 35% for the forecast year 2026 and 20% for the forecast year 2027.

The Governance Impact assessment of 'Good' results in no adjustment.

The Operating Environment Impact assessment of 'aa-' results in no adjustment.

The SCP is 'bb'.

Recovery Analysis

The senior secured ratings reflect the application of Fitch's 'Corporate Recovery Ratings and Instrument Ratings Criteria' for 'BB' category issuers and category 2 first lien debt. Therefore, the secured debt is rated one notch above DIRECTV's 'BB' IDR, supported by expected recoveries in the 'RR2' range.

The 'RR2' Recovery Rating reflects enterprise value (EV) uncertainty for DIRECTV in a secularly declining industry. It is exposed to the traditional linear television market, which is facing structural headwinds, including cord cutting and evolving customer preferences.

Given DIRECTV's status as a private company and its most direct public peer, Dish DBS, operating as part of a larger more diverse entity, EV is uncertain. This uncertainty limits confidence in an EV that would support superior recovery expectations. While the instruments benefit from structural priority, the combination of valuation uncertainty and industry pressures constrains recovery to substantial rather than superior levels, consistent with 'RR2' relative to 'RR1'.

RATING SENSITIVITIES

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade

Prolonged declines in revenue and EBITDA, not offset by reductions in debt, leading to EBITDA leverage of 2.5x or greater;

EBITDA leverage greater than 2.5x due to leveraging transactions, particularly without a credible deleveraging plan, or a more aggressive financial policy.

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade

Fitch does not anticipate an upgrade at this time, given the secular trends in the industry;

Successful execution on initiatives to return to revenue/EBITDA growth, along with EBITDA leverage maintained at 1.5x or less.

Liquidity and Debt Structure

DIRECTV's liquidity is supported by cash on hand, strong FCF and full availability under a $500 million revolving credit facility as of March 31, 2026.

As of Dec. 31, 2025, DIRECTV's capital structure consisted of approximately $6.135 billion of senior secured notes, a $1.79 billion first lien term loans, a $500 million undrawn revolving credit facility and $55 million outstanding of rolled over unsecured notes at DIRECTV Holdings, LLC. The debt is issued at DIRECTV Financing, LLC (with DIRECTV Financing Co-Obligor, Inc. as co-issuer on the notes) and is guaranteed by DIRECTV Financing HoldCo, LLC, a wholly owned subsidiary of DIRECTV.

The company also has a three-year accounts receivable securitization facility due in 2028 with up to $500 million of availability. The facility had $428 million outstanding at Dec. 31, 2025. Fitch expects the company will continue rolling over the accounts receivable facility.

Issuer Profile

DIRECTV provides video entertainment services consisting of the DIRECTV direct-to-home satellite business, U-verse video and DIRECTV Stream.

Date of Relevant Committee

28 January 2026

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS

Click here to access Fitch's latest quarterly Global Corporates Sector Forecasts Monitor data file which aggregates key data points used in our credit analysis. Fitch's macroeconomic forecasts, commodity price assumptions, default rate forecasts, sector key performance indicators and sector-level forecasts are among the data items included.

Climate Vulnerability Signals

The results of our Climate.VS screener did not indicate an elevated risk for DIRECTV.

ESG Considerations

The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.

RATING ACTIONS

Entity / Debt

Rating

Recovery

DIRECTV Financing, LLC

senior secured

BB+

New Rating

RR2

DIRECTV Financing Co-Obligor, Inc.

senior secured

BB+

New Rating

RR2

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PARTICIPATION STATUS

The rated entity (and/or its agents) or, in the case of structured finance, one or more of the transaction parties participated in the rating process except that the following issuer(s), if any, did not participate in the rating process, or provide additional information, beyond the issuer's available public disclosure.

APPLICABLE CRITERIA

Corporates Recovery Ratings and Instrument Ratings Criteria (pub. 03 Aug 2024) (including rating assumption sensitivity)

Corporate Rating Criteria (pub. 10 Jan 2026) (including rating assumption sensitivity)

Sector Navigators - Addendum to the Corporate Rating Criteria (pub. 10 Jan 2026)

APPLICABLE MODELS

Numbers in parentheses accompanying applicable model(s) contain hyperlinks to criteria providing description of model(s).

Corporate Monitoring & Forecasting Model (COMFORT Model), v8.2.0 (1)

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