King of All Trades Staff -

Sirius XM Radio(NASDAQ:SIRI) has received two S & P corporate credit ratings upgrades this year. In April S & P took their corporate credit rating  from CCC to CCC+, and another one in August to a B- rating.  Perception of a company’s debt load and its ability to repay that debt is vital to a company’s ability to obtain new money for refinancing existing debt for better terms, or to obtain new debt altogether.

Now this month JP Morgan (NYSE:JPM) has initiated coverage of  Sirius XM’s credit.  They have begun coverage with an over-weight rating.  Sirius XM Radio has confirmed this coverage.

This rating typically indicates the company’s debt is a reliable long term investment at this point in time.  As equities are bought and sold, so are a company’s bond issues.  It appears now that JP Morgan will cover both Sirius XM’s equity, which they have given a Neutral Rating, and now their debt as well.  JP Morgan re-initiated coverage of Sirius XM’s equity in May of 2009.

Being bullish on a company’s debt is encouraging, as the company may seek to further refinance existing debt, especially the 550 million in bonds sold in July of 2008, to facilitate the merger of the two companies, Sirius Satellite Radio, and XM Satellite Radio.  These bonds were considered “ugly financing” by investors due to the company giving lent shares along with the bonds so they could be properly hedged.  If this debt were to be refinanced with new money, the rate might come down (7%), and the lent shares (202 million against the current float) would be returned and destroyed by the company.  These shares have never counted when calculating earnings per share, but are still involved in the float.  In the Q3 quarterly report Sirius XM reported 60 million of these lent shares were returned and destroyed by the company.

Another bond issue Sirius XM might target is the other bond issue needed to facilitate the merger in July of 2008.  These 13% 770 million notes due in 2013 carry a higher interest rate, and are due sooner.  Either way, both have reasons to be targeted first, depending on managements corporate strategy.

Sirius XM was able to refinance most of its 2009 outstanding debt due to Liberty Media’s loan in February of this year.  Sirius XM’s 40% equity stake awarded to Liberty for this assistance is trading in Liberty Media’s holding company, Liberty Media Corporation Capital (NASDAQ:LCAPA).  Other tracking companies of Liberty Media include Liberty Media Corporation – Interactive (NASDAQ:LINTA), (NASDAQ:LINTB), Liberty Media Corporation – Starz, (NASDAQ:LSTZA), (NASDAQ:LSTZB), and Liberty Media Corporation Capital (NASDAQ:LCAPA), (NASDAQ:LCAPB).  Liberty also owns the controlling interest in Worldspace, Inc. (OTC:WRSPQ).

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By Steve Garcia -

As I stated in a previous article several weeks ago entitled: “Sirius XM Radio (NASDAQ: SIRI) and Liberty (NASDAQ: LCAPA, LMDIA, LINTA) Pursue Other Markets”, it appears things are heating up for the future plans of the Satellite Radio Company. On November 13^th Liberty Global, another of John Malone’s diverse holdings issued the following Press Release titled “Liberty Global to Acquire Unity Media.”

In the release it states the following points of interest:

1) November 13, 2009: Liberty Global, Inc. (“Liberty Global,” “LGI,” or the “Company”) (NASDAQ: LBTYA, LBTYB and LBTYK) today announced that it has entered into a share purchase agreement with Unity Media S.C.A. to acquire all of the issued and outstanding capital stock of Unitymedia GmbH (”Unitymedia”), Germany’s second largest cable operator.

2) Liberty Global will acquire 100% of the shares of Unitymedia for an equity purchase price of €2.0 billion ($3.0 billion), from its parent, which is owned by a group of shareholders led by BC Partners and Apollo.

3) Liberty Global is being advised by Goldman Sachs in connection with this acquisition.

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By Relmor Demitrius

Welcome back today for part 2 of the King of all Trades earnings preview in advance of Sirius XM Radio’s (NASDAQ: SIRI) third quarter conference call, which is taking place on the 5^th of November.  In case you missed Part 1, you can find that article here – Sirius XM Radio Q3 Earnings Preview #1.

As Sirius XM entered into the last half of the year, Mel Karmazin, CEO of Sirius XM radio, had given us a $400 million EBITDA guidance, and Sirius XM has only realized about half of this amount in the first two quarters.  Q3 being a traditionally cost heavy quarter (costs increases in Q3 results from charging a large amount of chip related costs, and inventory creation), there are few expecting any EBITDA additions to Mel’s yearly guidance (I think we get some anyway).  Q4, a revenue intensive quarter that should allow Sirius XM to post its first ever fully adjusted profits in its history (Free cash flow has already been achieved).  Mr. Karmazin has alluded that the company will be FCF (free cash flow) positive for the entire year for 2009.  In between this potentially historic earnings report and now is a Q3 that should still show significant improvements in becoming a profitable entity, and allowing Sirius XM to enter 2010 as a potential cash machine for the first time in its long and troubled history.  Sirius XM appears to be finally turning the corner after always being underwater with huge start up costs (infrastructure, satellites, licenses, talent acquisitions, paying forward for future subscribers off the backs of current subscribers, etc..).  Let’s take a look now at the numbers. (more…)