Let's Give Sirius XM Some Credit

Sirius XM Radio (Nasdaq: SIRI  ) is making some serious money these days, so letting it rain on its creditors makes sense.

The satellite radio giant will redeem all of its outstanding 9.75% Senior Secured Notes due 2015 in a few weeks.

Sirius XM will have to pay a slight premium to retire the $186.1 million in debt that isn't due for another three years, but the company has worked the math. It will be sparing itself and its shareholders three years of paying a beefy 9.75% interest on the notes.

Satellite radio is now consistently profitable, and its billions in net operating losses will make sure that the tax bite is minimal in the near future. Subscribers have grown sequentially for 12 consecutive quarters, and there's little reason to see that trend ending anytime soon.

In other words, Sirius XM has the flexibility to begin using the $700 million in free cash flow that it's targeting for 2012 on repurchasing shares and paying down its debt.

September is the first available redemption window for the 2015 notes, and Sirius XM is hopping on it.

Some may argue that Sirius XM may want to hoard its newfound greenery until it sees what Liberty Media (Nasdaq: LMCA  ) -- with its effective 46.2% stake in the company -- is up to. There's no need for hefty R&D spending at this point, but it may want to invest in its streaming business to make sure that its upcoming music discovery offering is up to snuff with Pandora Media (NYSE: P  ) , Clear Channel's (OTC: CCMO) iHeartRadio, and the recently-launched Spotify radio service.

However, Sirius XM's turnaround in recent years has materialized without the need to worry about outside distractions. Sirius XM continues to grow, despite the heady listener gains at Pandora, and last year's re-launch of iHeartRadio.

The best use of Sirius XM's money is to increase the attractiveness of its shares as an investment, and paying down debt, and repurchasing shares, are the two clearest paths to get there.

Running of the bulls
I remain bullish on Sirius XM's future. It should come as no surprise that I'm promoting the CAPScall initiative for accountability by reiterating my bullish call on Sirius XM for Motley Fool CAPS.

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The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story, except for Liberty Media. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.


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