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Sirius Sings the Moody's Blues

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Slather some bittersweet frosting on this layered cake of pessimism. Credit rating agency Moody's is lowering its debt rating on Sirius XM Radio (Nasdaq: SIRI  ) , fearing that the company's poor liquidity will be hard to overcome in light of well more than $3 billion in debt on its books.

It's not the only worrywart, of course. Shares of Sirius haven't traded as low as $0.08 a share this month by accident.

The company is trying.

As of September, the satellite radio provider was staring at three huge debt maturities:

  • In February, a $300 million Sirius convertible is due.
  • In May, $350 million in XM bank debt must be repaid.
  • In December, a $400 million XM convertible is due.

It has already been whittling away at the Sirius convertible, repurchasing the debt or swapping it out for stock. The February toll has now been taken down to $193.6 million in aggregate principal.

Between its present liquidity and its authorization to have as many as 8 billion shares outstanding, Sirius XM has enough ammo to get through February. Now it needs to clear the May and December hurdles.

Renegotiating with creditors is never easy, but buying itself time is the name of the game. Sirius XM expects to break even on a free cash flow basis in 2009, with $300 million in adjusted EBITDA.

Sirius XM is well connected, but many of its allies are struggling. General Motors (NYSE: GM  ) or Ford (NYSE: F  ) would be logical companies to approach for a handout in merrier times, but they're too busy panhandling for themselves at the moment. Terrestrial radio operators like CBS (NYSE: CBS  ) , Clear Channel, or Cox Radio (NYSE: CXR  ) would love to pay up to syndicate some of the signature talent on Sirius and XM through conventional radio, but they're also smarting. 

Music subscription providers like RealNetworks (Nasdaq: RNWK  ) have the money, but what kind of content outsourcing deal would it take to get in on the Rhapsody parent's balance sheet? Best Buy's (NYSE: BBY  ) Napster has rubbed elbows with satellite radio before -- it inked a deal two years ago where XM listeners can purchase songs through Napster -- but acquiring a stake in Sirius XM may be a conflict of interest for the consumer electronics retailer.

In short, Sirius XM is likely going to have to get itself out of the debt-laden hole it got itself into. If it succeeds, shares of Sirius XM may be one of the best performers of 2009. If it doesn't, Nil City won't be too far away and Moody's can always say it told you so.

Some other tales of low-priced stocks on the move:

Best Buy is a Motley Fool Inside Value and a Motley Fool Stock Advisor pick. The Fool owns shares of Best Buy. Try any of our Foolish newsletters today, free for 30 days.

Longtime Fool contributor Rick Munarriz is such a fan of satellite radio that he subscribes to both Sirius and XM. He does not own shares in any of the stocks in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.

Read/Post Comments (7) | Recommend This Article (19)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 24, 2008, at 1:23 PM, DemianBohemian wrote:

    The Motley Fool is at it again - bashing SIRI with false info. They finally fixed the error in their previous article that I had pointed out to them more than once. On Dec. 19th in the "article", Sirius Ammo for 2009, they falsely stated....

    "The real shame here is that Sirius XM took so long to face its refinancing and share price demons. A $300 million Sirius convertible is now due in two months, the first of next year's three huge tollbooths."

    It was actually 210 million at the time and even less now. So they were off by 90 million! They were recommending XM as a stand alone company to their paid subscribers at over $30 a share and now they are bashing the combined company down in the pennies and are doing so with false info. There was no correction noted on that article......

    In this "article" they say......

    "Shares of Sirius haven't traded as low as $0.08 a share this month by accident."

    This is misleading. There was a single block of shares that went through way below the bid and the ask for like 100 shares. It is misleading to say it "traded" at 8 cents. If I was to go and sell 100 shares of SIRI on the open market for 1 cent a share, does that mean it traded at 1 cent?

    The Motley Fool is writing misleading "articles" to try and "fool" you.

    We won't get fooled by The Motley Fool again.......

  • Report this Comment On December 24, 2008, at 4:20 PM, 181736065 wrote:

    Gee, I guess Howard Sterns "options" will all expire worthless.

    Bill J. (who just bought another XM receiver)

  • Report this Comment On December 24, 2008, at 7:15 PM, TMFBreakerRick wrote:

    Demian, you were right about the $300 million debt due in February being $210 million at the time the previous article was written. I have made it crystal clear this time around. Point taken and earned.

    However, show me one source that does NOT have the company's 52-week low listed as $0.08 a share.Whether it was a single trade or countless trades, it still traded at that point. If it was a clerical error it would have been corrected.

    Calling it "false info" this time, quite frankly, is false. And whether it was the low of $0.08 or the current price of roughly $0.12, the point is the same.

    Happy holidays.

  • Report this Comment On December 25, 2008, at 12:11 PM, Lamley2 wrote:

    There are a lot of content providers that might be approachable for a little assistance as well, such as the NFL, NBA, NHL, Major League Baseball, and any/all teams of the aforementioned groups, college football conferences, and NASCAR, not to mention CNN, Fox, ABC News, etc. There are also the hardware manufactureres that you mention, as well, such as Kenwood, Audiovox, JVC, Alpine, etc. Rural dwellers are especially sold on satellite radio (because that's the way they get a tremendous variety of choices), so Farmers Cooperative and other rurally-oriented groups might be approachable as well. All of these organiziations have as a vested interest the survival of satellite radio. If Sirius-XM can get just a little assistance from a number of them it all adds up, and that would certainly help.

    As you put it, Sirius-XM is well connected.

  • Report this Comment On January 03, 2009, at 1:13 PM, jerseygoods wrote:

    To all you Motley Fool Sirius bashers... The time is coming when you will see this company turn around..whenever good news comes out so does the cockaroaches out of every crack and cranny to spread there crap to keep this company down...But why do they waste so much of their precious time to bash a .12 stock?.....As far as the .08 stock sell I personally had a buy in at .10 and IT DID NOT EXECUTE...WHY BECAUSE THE .08 BID SLIPPED THRU... IT WAS A MISTAKE!! Anyway Its only a few weeks from now we will see who the real FOOLS ARE! BUY NOW While you still have the chance to get in this Billion $ Company Cheep.. & Happy New Year To All BUT Especially The Loyal Sirius Investors 2009 is OUR YEAR! YOULL SEE!!!!

  • Report this Comment On September 04, 2009, at 7:38 AM, mikebz5 wrote:

    LOL, what's SIRI trading at today? Umm, .62. I hope you FOOLS bought in at the .08-.10 range!

    I wonder where the SP will be THIS December...We'll see won't we?

  • Report this Comment On September 04, 2009, at 7:39 AM, mikebz5 wrote:

    Doom and Gloom! Doom and Gloom! Priceless....

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