Sirius XM Improves Balance Sheet
Sirius XM made a giant stride with their balance sheet today by calling in $500 million of the 9 5/8% notes due 2013. The move is coupled with a new $550 million issue of Senior Notes due 2015. The new notes do not yet have a published interest rate, but it is assumed that it will be better than the current rate given market conditions and the strength of the company. About 25% of the debt that was due in 2013 is now pushed off to 2015, and thus, the balance sheet improves.
This move does not take out all 2013 debt. Also due in 2013 are the $778MM Senior Notes at 13%. This merger associated debt has covenants that do not allow them to be prepaid. Thus the company refinanced the debt that they could. 2013 will still carry about $1.3 billion in debt.
The new issue will carry minimal impact on the Q1 financials. In order to extinguish the 9 5/8% notes, the company must pay a premium. Most of the costs associated with the refinancing will be a non-cash charge. The big news here is that the debt load of Sirius XM is far more manageable now than it was previously.
All in all, this is the type of move made possible by the company showing strength. The new notes are fiscally responsible and a positive for investors.
Position – Long Sirius XM
Are you sure they cant push out further and lower interest rate, or prepay any of the remaining 1.3 billion due in 2013?
Excellent article Tyler. Mel continues to restructure debt to push back debt and lower costs that will continue to improve the balance sheet. Don’t expect Mel to use cash since he has said that he learned a lesson that one never should be caught cash short. Also, the removal of restrictive covenants continues a trend that long term will imho result in stock buybacks…something Mel has also previously mentioned.
SIRIUS XM Radio Prices Offering of $800 Million of Senior Notes Due 2015
NEW YORK, March 12, 2010 /PRNewswire via COMTEX News Network/ — SIRIUS XM Radio (Nasdaq: SIRI) priced an offering of $800 million of Senior Notes due 2015.
(Logo: http://www.newscom.com/cgi-bin.....YTU044LOGO )
The notes, which were offered pursuant to Rule 144A and Regulation S under the Securities Act of 1933 (the “Securities Act”), will bear interest at an annual rate of 8.75%. The price to investors will be 100% of the principal amount of the notes. The company will receive gross proceeds of $800 million from the sale of the notes before deducting the initial purchasers’ commissions and estimated offering fees and expenses.
SIRIUS XM will use the net proceeds from the offering to redeem all of its outstanding 9-5/8% Senior Notes due 2013, including premiums and accrued and unpaid interest thereon; to prepay in full all of its borrowings under its senior secured term loan that matures in 2012; and to pay fees and expenses related to the offering. SIRIUS XM intends to use any remaining net proceeds for general corporate purposes.
Spencer,
You need to update your article to the increased 800M
And Liberty is buying $150 million of the notes
http://www.reuters.com/article.....312?rpc=44
Welcome back Tyler, we missed you. You and Brandon keep us well informed…..Thanks. Go SIRI Go!
It is possible that SIRI will have 1 billion in cash by the end of 2010. Possibly 1.6 0r 1.7 billion by the end of 2011. Next test is do they add more than 500,000 subs in 2010. They should add 1 million based on 12 million auto sales. If they do the stock goes to $1.35 to $1.50. Potential takeout number goes to $2.00. A spoiler for a higher takeout price could be Dish. He won’t let Malone steal the company.
Spencer
I have to agree. This is a great improvement in the company’s balance sheet.
$500 Million in debt has been transformed into $800 Million. I can scarcely wait until the NEXT improvement when THIS $800 Million in debt will be “improved” to 1.5 Billion!
Mel does LOVE big numbers. Especially in the liabilities section.
What a turkey.
You obviously neglected to read the $800 million debt offering press release! They retired some 2013 AND NOW some 2012 debt. Try reading the company press release before jumping to FOOLISH conclusions.