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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: