SiriusXM Prices Offering For $1 Billion In Senior Notes
SiriusXM initially announced an offering of $750 million in senior notes to be due in 2025. Within hours, the number grew to $1 billion in senior notes at an impressive 5.375% that would come due in 2025. It could be that the appetite for these notes was such that the company saw the ability to raise the stakes a bit.
SiriusXM has been very good about debt over the last few years, and has been adept at maintaining a good debt to EBITDA ratio. The company has massive revenues, and frankly, borrowing money at a bit over 5% is likely a very wise move. SiriusXM has used such debt offerings to pay down higher debt and to buy back shares. Last year the company spent $2.5 billion to buy back 739,000,000 shares.
SiriusXM currently carries about $4.5 billion in debt with most notes being due after 2020. The company has carried a very disciplined approach to its debt as well as its share buyback program. Some investors do not like the idea of debt, but smart debt can give a company like SiriusXM a great deal of operating latitude at a very reasonable cost.
The news is certainly good, and the rate is decent. However, it appears siri borrowed over $600M from its line of credit that they may want to credit back.
If we assume the average buy bach share price at $4 in 2015 they may buy back another 400M to 450M shares instead of 700M as John Tinker of Maxim Group models. This is certainly quite positive but not as positive as 700M shares that would make quite a dent in the share count plunging it under 5B and increasing significantly the fcf per share.
I agree with Meyer that keeps saying that “this is a marathon rather than a sprint”. It may take another four years till the end of 2019 to bring the share count to about 4B shares without driving debt. Nevertheless this is a constant very well controlled movement forward to a double digit share price in not so distant future.