Satellite Radio Playground

This is part 2 of a multi-part review of the milestones and achievements of Sirius XM during 2010.

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By Brian “Newman” Rayl

2009 was a scary year for Sirius XM (NASDAQ:SIRI) investors, subscribers, and the company management themselves. In March of 2010, the Satellite Radio service provider was days away from defaulting on major loans that would have forced the company into bankruptcy. Liberty Media Corporation (NASDAQ: LMDIA, LCAPA, LINTA, LSTZA) stepped in and provided the financing that Sirius XM needed in exchange for 40% of the company. While the shareholder dilution was disheartening, it kept the company out of bankruptcy and ended up earning investors a lot of money on their blood, sweat, and copious tears. At the end of 2009, Sirius XM had over 3.2 billion in debt on their books. What a difference a year makes!

In January, after Sirius XM pre-released its subscriber additions for full-year 2009, Moody’s Investor Services upgraded the Sirius XM Corporate Faily Rating (CFR) from “Ca” to “Caa1″ noting improved liquidity, but noting that the “Caa1″ rating was still considered “junk” status. Standard & Poor’s also upgraded the company’s debt from “B-” to “B,” reflecting the company’s debt leverage and weak interest coverage.

March 2010 was the beginning of the company’s debt reduction crusade. On March 12th, the company announced that it intended to offer $550 million in Senior Notes. The offer was obviously met with huge interest because later that same day Sirius XM increased the size of the bond offering to $800 million, and priced it without a new issuance discount. The notes were priced at 8.75% interest on March 17th and were used to repurchase all $500 million of the outstanding 9 5/8% Senior Notes due 2013, as well as $244 million under the company’s Senior Secured term loan due 2012. Read More