EFTA01378309.pdf

INTERNAL USE ONLY DO NOT DISTRIBUTE IN PART OR IN WHOLE Corporate Credit > U.S. Investment Grade DIRECTV (DTV) Updated: Nov. 1, 2015 Trade Idea: Buy short to intermediate DIRECTV bonds. Investment Rationale: AT&T's acquisition of DTV closed in July 2015. The has not been a final indication if DTV bonds will be guaranteed or to what degree if at all but we view the entity as strategically important to AT&T. Spreads rallied hard into 2014 but traded off in early 2015 on AT&T downgrades to high-BBB and supply concerns to fund the DTV and lusacell deals and spectrum purchases in the recent AWS auction. We believe that spreads could recover further into 2016 once these events are behind us. Positively, following multiple USD & non-USD bond deals, AT&T's domestic issuance needs have lessened in the near term. Even with the risks, OW spreads continue to look cheap versus the IG Index and TMT peers. DTV is satellite pay TV provider with operations in the U.S. and Latin America and $33 billion of revenues. DTV has continued to grow its global subscriber base (37 million+ and 20 million+ in the U.S.) and should continue to generate strong FCF especially as its LatAm business scales. DTV benefits from leading technology/interface and exclusive content. Also, some of the previous headwinds (lack of a broadband offering) should lessen post the combination with AT&T which will bring greater scale. Recommendation(s): Trade Ratings Issue Spread Cash View Horizon Ticker CPN Maturity CCY Size Yield Price ISIN SSP Moody s Entry Target Loss Outperform as/12 DTV 3 10512025 BBB Baal USD 1.200 404 191 175 235 99.3 US25460 CAA18 Deutsche Asset & Werith Management 9 CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0075478 CONFIDENTIAL SDNY_GM_00221662 EFTA01378309