XM Satellite Restructures Bulk of Debt

XM Satellite Radio (XMSR Quote) took the next step in preparing itself for Federal Communications Commission merger approval, by announcing it's restructured a majority of its outstanding debt.

XM, which is currently waiting for the FCC to rule on its proposed $3.1 billion merger with rival Sirius Satellite Radio (SIRI Quote), said late-day Friday it has restructured $600 million worth of senior notes at 9.75% due 2014. Holders will receive a combination of at least $400 million of cash -- a much larger figure than analysts had anticipated -- and up to $200 million in new senior notes issued by XM.

The new yield on the exchange notes will not be less than 13.92% per year, although that yield will be raised to not less than 15% if XM issues less than $150 million in new debt. The new notes will mature in 2014, or in 2013 "in certain circumstances."

In exchange for the higher rate, the agreement requires that holders of the senior notes waive XM's change-of-control repurchase obligation, which would come if the merger was ultimately approved. The waiver is subject to the consummation of the merger, and it is set to expire on Aug. 31.

"This takes care of a little over half of XM's outstanding debt," says RBC Capital Markets analyst David Bank, who says the company previously had about $1.1 billion in senior debt. "This move is compensation for new terms for noteholders, terms which may be perceived as having more risk that reflect current market conditions."