Citing a negative outlook for approximately $2.2 billion million of rated debt instruments, Moody’s Investors Service downgraded Sirius Satellite Radio Inc.’s probability of default rating (PDR) and corporate family rating (CFR) to Ca from Caa1. Ratings and loss given default assessments of debt instruments issued by Sirius and its wholly-owned subsidiaries, XM Satellite Radio Holdings Inc. and XM Satellite Radio Inc. were adjusted accordingly. The rating outlook is negative.
“The company’s speculative grade liquidity rating (SGL) remains positioned at SGL-4 (indicating poor liquidity). With nearly $1.0 billion of its $3.3 billion total debt coming due in the New Year ($190 million in February, $350 million in May and $433 million in December), and given the current background of capital market dislocation and the company’s poor liquidity situation, the rating actions anticipate that Sirius will be unable to repay or refinance its maturing debts without negotiating some sort of compromise arrangement with at least a portion of the affected constituents.
Sirius has already initiated transactions to refinance portions of its debt. In recent weeks, the company has completed a number of “3(a)(9)” equity for debt exchanges. Despite the potential of certain benefits such as a net reduction in debt and a lower total interest burden, Moody’s considers these transactions as being analogous to a distressed exchange of the applicable debt instruments based on the perspective that the company is under financial stress.
Moody’s expects additional refinance activity that may include additional equity for debt exchanges as well as other alternatives to be highly likely. This is reflected in the PDR revision. In turn, this causes the CFR revision as well as changes to the ratings and LGD assessments of individual debt instruments. The negative outlook is reflective of possible further rating pressure pending refinance activities and the likely debt structure that will result.”
Position – Long Sirius XM