Sirius XM Radio (SIRI) has announced their intention to offer $250 million in Senior Secured Notes due 2015. The purpose of the financing is to repay some of the debt held by Liberty Media at a higher interest rate. This event will push out some debt, albeit at a more manageable rate. It would appear that this move will help cash flow, and remove debt concerns in the near term.
The credit market has seen a new spark lately, as it appears that money is starting to loosen up. Last week Sprint was able to obtain financing in a major deal, and they are not alone. Just months after financing seemed to be at a standstill for nearly everyone, companies are suddenly able to make moves similar to the move made by Sirius with this announcement.
Liberty still holds some Sirius debt, but this move will erase a 15% rate on about $250 million that Sirius XM borrowed to stave off a possible bankruptcy. Liberty had stated about a week ago that they anticipated that Sirius XM would be refinancing some debt, and with this announcement, that speculation has been confirmed. In Sirius XM's bond offering last month, Liberty bought $100 million worth. Those bonds will not be what is refinanced in this latest offering, as they already have a much friendlier rate.
Once complete, Sirius XM will have pushed much of their debt out to 2013 and beyond. This will give the company stability as they approach positive full year EBITA, and then profits.
Position - Long Sirius XM Radio - No Position Liberty