Sirius XM Radio announced this morning that XM Satellite Radio Inc., a wholly owned indirect subsidiary of SIRIUS XM Radio, is offering of $350 million in aggregate principal amount of Senior Secured Notes due 2013 to qualified institutional buyers. The move is designed to seek better terms on what was $350 million of XM bank debt that was originally due this past May.
The story of this debt is long and can be a bit confusing because of various activities since the merger. This offering has nothing to do with the Sirius XM debt that was taken on to complete the merger, but instead what was existing debt for XM. That $350 million was recently refinanced with Liberty Media's John Malone taking on $100 million of it, and the balance of $250 million financed in traditional methods.
This new offering will refinance, and effectively pay off the $100 million borrowed from John Malone, as well as pay off the balance of the traditional bank debt which now stands at $225 million. The remaining $25 million will be used for "closing costs" as well as general corporate purposes.
Sirius XM is looking for better terms, as well as a slight extension in the time-frame of payback. This new move should create a better cash flow for the company, as well as lower the interest rates which the company is paying. Finalized terms have not been announced.
For Sirius XM investors, the debt picture had been a major concern. It was the debt picture coupled with approaching maturity and a bad economy that had Sirius XM on the brink of a possible bankruptcy filing prior to Liberty Media's Joe Malone stepping into the picture. The fact that the company is active in restructuring their debt picture demonstrates that not only is the company gaining their footing, but that the confidence of the street in Sirius XM's ability to repay debt is increasing.
Position: Long Sirius XM, No Position Liberty Media.