Sirius XM Makes New Friends

(Updates with closing share price)

Sirius XM (SIRI Quote) subscribers may not think very much of the new Apple (AAPL Quote) iPhone application, but it appears the ratings agencies are warming to the satellite radio operator's overall prospects.

After the company's XM Satellite Radio subsidiary announced Monday it would issue $350 million in senior, secured notes, Moody's Investors Service and Standard & Poor's seem slightly more optimistic on the embattled company.

In an update Tuesday, Moody's upgraded Sirius XM's speculative grade liquidity rating to SGL-3 from SGL-4, which the firm said "reflects the reduction in near term maturities due to the $350 million bond offering." Moody's also said the rating outlook remains positive.

"The positive rating outlook reflects the improved potential for Sirius XM to address its near term maturities and allow additional time to combine the XM and Sirius operations and realize the cost saving benefits from the merger," Moody's said in the report.

The review wasn't completely glowing, though. Moody's assigned a Caa1 rating, which is below junk, to XM's proposed $350 million senior secured notes, which the firm said reflects the slightly higher amount of secured debt.

Additionally, Moody's said that while the company's earnings and cash flow performance have improved since the July 2008 merger, it "remains concerned that subscriber losses could increase due to weakness in consumer spending and auto sales, challenging the company's ability to sustain positive [earnings before interest, taxes, depreciation and amortization, or EBITDA]."

Meanwhile, Tuna Amobi, an analyst with Standard & Poor's Equity Research, said the $350 million senior note offering shows the company's ability to refinance maturing debt for XM and suggests the "continued thawing of credit market, effectively buying more time to navigate near-term operational challenges."