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As Good As It Debts for Sirius XM

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You don't typically applaud a company issuing new debt, but even its harshest critics should be cheering Sirius XM Radio's (Nasdaq: SIRI  ) move to offer $257 million in senior secured notes.

The debt priced at a fair price last night, with Sirius XM paying a modest interest rate of 9.75% until the notes mature in 2015.

Let's put this offering into its proper perspective. Flash back to February, when Sirius XM was on the ropes. It had a pair of interested saviors, Liberty Media (Nasdaq: LCAPA  ) and EchoStar (Nasdaq: SATS  ) , but it couldn't exactly stoke a bidding war.

Liberty wound up loaning Sirius XM the money it needed, but with a rate as high as 15%. It also gained a chunky 40% stake in the satellite-radio operator, just for its bravery in stepping in to resuscitate the radio giant.

A loan shark knows when you're desperate, and Sirius XM was definitely in need this winter.

However, now that bankruptcy whispers have faded away, Sirius is a more stable company. Fewer subscribers are coming than going, but the company's cash flow statements continue to improve.

If someone had suggested a year ago that Sirius XM could borrow hundreds of millions of dollars at a rate in the single digits, they would have been dismissed as criminally insane. Once the post-merger buzz faded away, creditors were keeping their distance.

Sirius XM isn't having much of a problem attracting believers these days.

The real beauty of the new notes is that they will replace Liberty debt that was bearing a higher interest rate. The 2015 maturity also gives Sirius XM six years to mine its operating efficiencies.

The lessons behind the economic recession may involve booing the borrowers, but this is one time where you have to give Sirius XM credit.


Other ways to slice and dice satellite radio fandom:

Longtime Fool contributor Rick Munarriz is a subscriber to both Sirius and XM. He does not own shares in any of the companies in this story. He is also a member of the Rule Breakers analytical team, seeking out the next great growth stock early in its defiance. The Fool has a disclosure policy.

Read/Post Comments (18) | Recommend This Article (33)

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 August 14, 2009, at 12:33 PM, krobby1 wrote:

    Sirius is definitely doing what it needs to do. I am one who believes they are not going to die. Management does realize it has a huge debt load but they have jumped on it and I see where they are going to try and make it more manageable,piece by piece.

  • Report this Comment On August 14, 2009, at 12:34 PM, RAF22 wrote:

    Sirius XM Radio's ability to refinance outstanding debt via bond issuance at substantially lower interest rates is testimony to the turnaround of this company and the prospect of continued prosperity into the future. The resurgence of auto demand, with significant ramping up of production is the number one story influencing market psychology for SIRI, as satellite radio installation will certainly be one of the features buyers will demand as they replace ageing vehicles with upgraded models. This long term flow will significantly benefit revenues for Sirius XM in coming months and years, and this is likely to be first seen in the upcoming 3rd and 4th Qtr. releases (in November and February). Against this backdrop, the stock should no longer show any vestiges of the "bankruptcy fears" which drove share prices below 1.00. The fundamental outlook for SIRI has turned positive - as evidenced by the ease of refinancing - and improved analyst recommendations and credit ratings should follow in due course. Current price action for SIRI reflects dominant strength, in conjunction with this fundamental improvement and it still appears early in the process. Shorts are now scrambling to cover and legitimate investment demand is also fueling price improvement at present. Potential is projected toward 1.00+ over the next six months to one year - and significantly higher longer term. Within this trajectory, an objective of .75 is projected to coincide with the timing of the 3rd Qtr. release in November. This should influence all activity over the interevening time span.

  • Report this Comment On August 14, 2009, at 1:04 PM, brian6545 wrote:

    What the heck are senior secured notes? Someone educate me.

  • Report this Comment On August 14, 2009, at 1:34 PM, matt1010101 wrote:

    Sirius XM will do well in the current environment (my belief). I am a very happy customer and I own the stock.

    I am confused by the Motley Fools' obsession with Sirius XM and their wavering opinion on this stock.

    This is not credible journalism. Do you believe that Sirius XM is undervalued or overvalued? Make a decision and support it...or don't talk about it.


  • Report this Comment On August 14, 2009, at 5:43 PM, chucksowers wrote:

    I feel the same way as Matt1010101.

    Just let us know how you really feel! I bought into Siris several years ago on a FOOL recomendation. I'm the foolish one! But, now that I own it, where will it go?

  • Report this Comment On August 14, 2009, at 6:14 PM, DiscoFinance wrote:

    There is a DVD movie out about the whole Sirius XM/Mel K. story called: Stock Shock.

    Very good flick and explains stock market manipulation as well. Stock Shock is at and

  • Report this Comment On August 14, 2009, at 6:24 PM, TxTom wrote:

    It will go UP!! I've been adding to my position in Sirius for about a year now, and the bottom line is GREEN. There is absolutely no obvious reason for this stock not to perform. Add to that the fact that we are in the recovery stage of a bad recession, and you have a winner!!

    Happy investing.

  • Report this Comment On August 15, 2009, at 4:36 AM, TMFEdyboom223 wrote:

    The Fool doesn't pick a position on a stock because it is comprised of investors that think as individuals. The writers are not clones of one another that all think alike. They have their own opinions and challenge the opinions of others when they disagree. It helps everybody learn, and hopefully, it makes everyone more successful than they would be otherwise.

  • Report this Comment On August 15, 2009, at 7:00 AM, grendeth wrote:

    You know every chip munk company now can refinance their business easily at a decent interest. Look at those government funded companies such as AIG, Citibank, GM etc.

    Heck, every losing businesses from LIZ to Sirius are able to get funding. The governments of the world has flooded financial market with funds to combat this recession if you have somehow forgotten.

    The question is, do you really think Sirius can come back from their coma?. If you think they can, their stock prices is ripe for your plucking. Nothing to it, its your funds anyway.

  • Report this Comment On August 15, 2009, at 7:19 AM, multi007 wrote:

    SIRI costs are still way to high. They overpaid drastically for their talent (Howard Stern comes to mind). There is no longer value in the product they offer. I am a siri subscriber BUT I must now pay for internet access? I dont. I must now pay for SIRI plus for the extra channel that I should have in my subscription? I dont. Being nickeled and dimed is not a way to make a business.

    With that said, I believe ther stock will go up primarily because of the "cash for clunkers" programs. More people getting new cars, MAY equal an increase in subscribers. I say "may" because you just dont know how many customers will convert to paying customers after they enjoy the free 3-6 month trial XM/Siri gives you at the time of a new car purchase.

  • Report this Comment On August 15, 2009, at 10:18 AM, plange01 wrote:

    sirius is great but its still going to fail..liking something and making money are 2 differant things...

  • Report this Comment On August 16, 2009, at 9:38 AM, wordcarr wrote:

    Sat radio business plan is flawed.Ther are several reasons,first there will never be enought people that find value in the service,second other newer services provide most of sat radio services for free.There is nothing sat radio can provide that is of value that can't be provided for free with advertising paying the way in another medium.

  • Report this Comment On August 16, 2009, at 1:07 PM, cantbefoolish wrote:

    Wordcarr, I have to disagree. There's a lot of value with a paid service. Advertising supported = censorship. And do those have the Woodstock channel, which I'm listening to right now? Do they have Howard, Bubba, Ferrall, Playboy, live sports, CNBC, Fox news, Potus, along with ad free music? Can they get reception in places that only satellite can get? Try using your internet radio, while driving through a desert, hilly area, or while on a boat. So, there are plenty of reasons to have sat. radio.

  • Report this Comment On August 17, 2009, at 9:18 AM, wordcarr wrote:

    Canbefoolish,one of the characteristics of blogs is that very few people actually read what others write.I didn't write that there is not value to sat radio,but rather there is not enought interest to pay the cost.One has only to be reminded of the stories of E-Bay Auctions of cow dung in the the shape of Jesus bringing big bucks to know that someone will find value in just about anything.Advertising means that there are enought people listening for a company to pay to reach.Even if there could be ads on Howard and Bubba what kind of company would want to be associate with them, pornsites and comdom companies?There's just not enough overland truckers and perverts to pay the way of sat radio.

  • Report this Comment On August 17, 2009, at 1:17 PM, cantbefoolish wrote:

    So wordcarr, are you saying that the people who pay for sat radio are primarily truckers and pervs? I believe that some of the most intelligent people are sat rad listeners. Where as the people who have to rip off music, tend to be the loser types. Sirius is installed in Mercedes and other high end cars. Are those drivers perverts? They also have plenty of other ways to reach an audience. I just listened to a pretty good Quentin Terantino interview by Howard, on my boom box, while trading stocks. Is that pervy?

  • Report this Comment On August 17, 2009, at 2:09 PM, cantbefoolish wrote:

    By the way, word... I was also able to pause my boom box, go make a nice breakfast, and mail some stuff I just Ebayed, without having to miss much. Let's see you do that with internet radio. And while I was driving, I checked a bunch of terrestrial radio stations. Those had either ads or crappy music. Which is why I think sat radio should succeed.

  • Report this Comment On August 19, 2009, at 2:33 PM, mikecart1 wrote:

    I still haven't seen anyone on this planet with satellite radio installed let alone it be sirius satellite radio. Rich people would rather get a sick sound system. Poor people don't even own cars. Who is buying this service?

  • Report this Comment On August 19, 2009, at 11:29 PM, daracc wrote:


    I have the service and drive a Mercedes. I dont think you know what you are talking about. Most of my friends also subscribe. I also own quite a bit of the stock, and believe it is going up.

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