Moody's Smiles on Sirius XM Debt Sale

Moody's believes that Sirius XM's proposal Friday to sell $550 million in five-year senior unsecured guaranteed notes not only boosts its liquidity profile, but also helps remove the obstacle to a fully combined Sirius XM.

Author:: Andrea Tse
Publish date:: Mar 12, 2010 7:10 PM EST

NEW YORK (

TheStreet

) -- Moody's believes that

Sirius XM's

(SIRI) - Get Report

proposal, announced Friday, to sell $550 million in five-year senior unsecured guaranteed notes due 2015 not only boosts Sirius' liquidity profile, but also helps remove the obstacle to a fully combined

Sirius XM (SIRI) - Get Report

"It's positive for the company in the sense that they have $1.8 billion of debt maturing in 2013 and this refinancing would push out $500 million of that by two years," Moody's analyst John Puchalla says.

Proceeds from Sirius XM's sales would go toward redeeming its $500 million in 9.625% senior unsecured notes due 2013. Moody's says it believes the offering improves the intermediate-term liquidity profile by reducing the sizable amount of 2013 debt maturities to about $1.3 billion, with minimal effect on overall cash interest expense.

Furthermore, it could help "remove the hurdle to combining the company," Puchalla says.

Right now, Sirius and XM are still legally separate entities even though XM is a subsidiary of Sirius. One of the obstacles to a completely combined entity is that there is a provision in the 2013 notes that has a $500 million dollar limit on secured debt, and it just so happens that Sirius has $500 million of secured debt and XM has $500 million of secured debt as well. That's a combined total of $1 billion of secured debt, which is no good under the current provision for 2013 notes.

So Moody's is taking a positive view of the proposed transaction -- although it readily admits the situation is far from perfect for Sirius XM.

For example, "in order to take those notes out they have to pay a 4% call premium on the 2013 notes, and that raises leverage slightly -- but they want to do this because it helps with the maturity profile," Puchalla points out.

Moody's maintains a stable rating outlook for Sirius XM.

-- Reported by Andrea Tse in New York

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