Last week Sirius XM announced a $550 million debt offering for the purpose of retiring $500 million of their 2013 debt. The move made great business sense. They retired debt that carried an interest of 9 5/8% in exchange for more time and a lower rate of 8 3/4%. These new notes will be due in 2015. The debt load due in 2013 has now been reduced from $1.8 Billion to $1.3 Billion. This move was well received by the street, and even Moody's applauded it. Often times, business is all about cash flow and balance sheets. This move improved BOTH.
After the close on Friday, Sirius XM announced that instead of $550 million, they would be closing the deal by borrowing $800 million. So what happens to the other $250 million? Their press release spells it out clearly. They are using that to pay down some 2012 debt. Typically, when companies put an offer out, the level of interest is gauged. It seems clear that there was substantial interest in this offering, and the company was able to raise far more than initially sought.
The debt load for Sirius XM remains essentially the same, but the timing of the debt is far more manageable than before. 2013 is still a big year for debt, but is more manageable than before. With the company showing an ability to be cash flow positive, they should be able to generate the cash needed to take care of their existing debt.
Position - Long Sirius XM