By Relmor Demitrius
Sirius XM Radio’s (NASDAQ:SIRI) Corporate Family Rating (CFR) from Moody’s Investors Service was upgraded today. They moved their CFR from Caa1 to B3. Moody’s also upgraded their probability of default from B3 to B2, and upgraded several individual instruments as well, including today’s new 550 million dollar notes.
Today Sirius XM announced a new debt offering, which is why Moody’s is commenting today. They are issuing 550 million dollars worth of new debt to remove their 11.25% senior secure notes due in 2013, which is on the XM side of the ledger. Moody’s assigned a rating of B3 to these proposed notes, due to maturity in 2018. This would allow the company more freedom to make decisions beneficial to stockholders, rather than debt holders. Removing debt covenants is important to allow the board 100% freedom to do what is in the best interest of the stockholder and the company in general. With moving debt out more evenly, Moody’s recognizes the risk of default drops dramatically. Also the type of debt is unsecured, which improves their overall corporate credit outlook.
S&P should follow with comments shortly. They may upgrade Sirius XM’s overall corporate rating as well, due to their coming out recently and announcing how Sirius XM was still on credit watch positive.
Sirius XM also announced today they once again added subscribers for the 3rd quarter, adding 334,000 subscribers. They are estimating adding similar amounts in the 4th quarter as well.
Issuing this new debt and removing the targeted bonds (overpaying to do this per dollar due) allows even and spaced out debt removal going into their major cash building years, now that the company is finally free cash flow positive. This also comes at an opportune time, as Sirius XM has no major debt due other than a 210 million dollar bond due in 2011. The closest debt due after that is now a 770 million dollar 13% bond due in 2013 issued to allow the merger to transpire in July of 2008. This is the only major debt due in 2013. 2012 is free of major debt notes coming mature.
For up to date financial news, fundamental and technical analysis, and forum discussions on all trades and investments, visit www.kingofalltrades.com.
Disclosure: Long SIRI
Great news Relmor! The trend in credit ratings continues upward and is just the thing the big institutions are looking for imo to get invested “big time” in this soon to be cash cow. As you indicated, should be an upgrade soon from S & P since they have already put the current rating on a “positive” watch for an upgrade. Thanks for getting this info out so timely…ed
i see absolutely no reason why they cant take the debt out with cash from here on out
SOS, if they can get an excellent interest rate, I see more restructuring and putting debt further out rather then using cash at this time. Mel has said that he doesn’t ever want to get caught cash short again so I think they will continue to build cash for now…I would expect the 2011 debt to be paid in cash thoughsince it is near term…jmpo
the xm 13% will likely soon be refinanced further out as well…….that interest rate is a monster
How about some news, it has been two weeks.
No updates since October 13? What gives?