Announcement: Moody's Says Proposed Offer by Liberty Media to Increase Its Ownership of Sirius XM to 100% is Credit Negative
Global Credit Research - 07 Jan 2014
New York, January 07, 2014 -- Moody's Investors Service said Sirius XM Holdings Inc. ("Sirius") recently announced its Board of Directors received a non-binding letter from Liberty Media Corporation (unrated) proposing a transaction to convert all outstanding shares of common stock of Sirius not owned by Liberty Media Corporation ("Liberty") into the right to receive 0.0760 of new, non-voting shares of Liberty Series C common stock. Immediately prior to a conversion, Liberty would distribute shares of Liberty's Series C common stock to all holders of record of Liberty's Series A and B common stock on a 2:1 basis. Upon the completion of the proposed transaction, Sirius public stockholders would own roughly 39% of Liberty's total equity market cap.
A Special Committee of independent directors of Sirius will be formed to consider Liberty's proposal. The transaction is conditioned on the approval of both the Special Committee and more than 50% of the minority public shareholders of Sirius. Assuming the proposed transaction is approved, Sirius would become a wholly-owned subsidiary under Liberty. Moody's views this transaction as credit negative given the potential for additional debt to be issued by Sirius, or a new holding company of Sirius, with proceeds to fund investments of Liberty. Management of Liberty has stated that it views Sirius as being under levered and could be more aggressive with its capital structure.
The issuer comment "Proposed Offer by Liberty Media to Increase Its Ownership of Sirius XM to 100% is Credit Negative" is available on www.moodys.com
Sirius XM Holdings Inc., headquartered in New York, NY, provides satellite radio services in the United States and Canada. The company creates and broadcasts commercial-free music; premier sports talk and live events; comedy; news; exclusive talk and entertainment; and comprehensive Latin music, sports and talk programming. Sirius XM services are available in vehicles from major car companies in the U.S., and programming is also available online as well as through applications for smartphones and other connected devices. The company holds a 37.7% interest in Sirius XM Canada which has more than 2 million subscribers. Sirius is publicly traded and a controlled company of Liberty Media Corporation which owns over 50% of common shares. Sirius reported 25.6 million subscribers, including 20.7 million self-pay subscribers, at the end of September 2013 and generated revenue of $3.7 billion for the trailing 12 months ended September 30, 2013.
Edit: Get ready folks... we are going to see some negative articles hit Seeking Alpha soon.