Sirius Xm To Pay Down $114 million of Debt
On June 1st, 2010, SIRIUS XM Radio will redeem all of its outstanding 10% Senior PIK Secured Notes due 2011, CUSIP Nos. 983759AE1 and 983759AH4, at a redemption price of 100% plus accrued interest. As of the redemption date, $113,685,000 of 10% Senior PIK Secured Notes due 2011 will be outstanding. XM issued the related notice of redemption to the trustee today, who will notify noteholders of the details of the June 1 redemption.
Sirius XM has had a string of positive news, and given other refinancing activity has improved cash flow substantially. Now they are working on the debt picture. This move will slightly improve their Debt-to EBITDA ratio, and goes further in cleaning up the balance sheet. Activity such as this is typically viewed as bullish, and could serve to spark more institutional interest in the equity.
David Frear, Executive Vice President and CFO stated, “Our strong cash position, strong first quarter subscriber growth and the improving outlook for the economy have put us in position to retire these notes a year ahead of schedule…The early retirement of these notes will reduce interest expense and increase our free cash flow.”
As of late, Mel Karmazin and the management of Sirius XM seem to be making all of the right moves that will instill investor confidence in the company. With the conference call only three trading days away, things could get very interesting.
Position – Long Sirius XM Radio
Big push to 1.37 – 1.42 into Tuesday morning
Mel is executing his business plan perfectly. As cash flow continues to improve, he is addressing the debt load in a very methodical manner that continues to improve the balance sheet. This should result in more credit upgrades. Look for more refinancing at better terms providing further savings in annual interest costs. Also, since there is very little debt due in the next two years, I look for the company to focus on the large debt due 2013. In particular, look for the company to refinance the $778MM in 13% notes due 2013. Once this debt is removed and possibly the 2014 debt of $550MM in 7% exchangeable notes, the company should have reached an “investment quality” rating by the credit agencies. This improvement in the balance sheet will be a huge relief to shareholders and provide for many other options for the company to consider.