As many readers are aware, Sirius obtained a $250,000,000 term loan from Morgan Stanley. We thought a deeper look into the workings of such an activity would be good and relative information for readers.

The loan, and the associated interest rate are locked in between Sirius and Morgan Stanley. Morgan Stanley then “re-packages” the debt and sells it off to investors.

Earlier this week S&P raised Sirius’ rating from CC to CCC+. This is an upgrade in status for Sirius. The Morgan Stanley loan is rated at “B” with a recovery rating of “1”. A “B” rating is still in what is considered “junk bond” status, but the level of risk is offset because the loan is secured. The recovery rating of “1” allows someone investing in these bonds to minimize risk.

Below is a chart outlining Bond ratings and recovery ratings:

bondmatrix.JPG

Position - Long Sirius