XM Selling Debt

The company wants to raise $600 million.
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XM (XMSR) shares slipped Monday on word of a $600 million debt refinancing plan.

The Washington, D.C., satellite radio shop says it is preparing to sell two blocks of senior notes and use the proceeds to repay some of its more expensive debt.

The latest round of financing comes as investors grow weary of the cash consumption the upstart pay radio industry seems to require. As of Dec. 31, XM had $1.03 billion in long-term debt and about $710 million in cash and cash equivalents on hand.

XM says it plans to use the new cash to pay down a 14% senior secured note due in 2009 and a 12% note due in 2010.

Last year, XM raised $400 million through the sale of 9.7 million shares of stock and convertible notes. The company used some of the proceeds to retire some high-interest loans.

Both XM and rival

Sirius

(SIRI) - Get Report

have taken on heavy losses and huge debts in a march toward the mass consumer market. But some industry observers have begun to question the sustainability of the companies' subscriber growth models.

An XM board member, Jack Roberts, long critical of the company's rising tide of red ink, abruptly quit in February over differences he had with top management. That move seemed to expose the cash bonfire behind the satellite radio subscriber success.

XM and Sirius have both vowed to turn the tide on losses and reach positive free cash flow by yearend.

XM shares were down 46 cents, or 2%, to $22.85 and Sirius was down 17 cents, or 3%, to $5.15 in trading Monday.