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This Week in Sirius XM Radio

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Things never get dull for the country's lone satellite-radio provider. Shares of Sirius XM Radio (NASDAQ: SIRI  )  moved nicely higher on the week, soaring 3.8% to close at $3.24. The move was a lot sweeter than the Nasdaq's 1.2% uptick. It's a pretty big deal. This is only the second time in the past 10 weeks that the stock has closed higher.

There was more going on beyond the share-price gyrations, though. Sirius XM raised a larger than expected $1.5 billion in new debt, and Liberty Media (NASDAQ: LMCA  ) and Sirius XM completed a stock purchase agreement. 

Let's take a closer look.

As good as it debts
Earlier in the week Sirius XM announced its intention to raise $750 million in new debt by issuing senior notes due 2014. The media giant has made the most of its improving fundamentals and credit ratings to swap out older debt with new obligations. However, this announcement didn't single out any actual debt that it would be replacing. This move was to raise funds for "general corporate purposes" that may include stock buybacks. 

Things got even more interesting on Thursday afternoon when it upped the offering to $1.5 billion. Sirius XM will be paying a modest 6% interest on the notes. The satellite radio monopoly has clearly come a long way. Just five years ago it was so strapped for cash that it had to hand over a 40% preferred share stake in the company to Liberty Media for the right to borrow a little more than a third of this amount at a 15% interest rate. That was a brilliant deal for Liberty Media. Now it's Sirius XM making the smart debt moves.

A company taking on new debt isn't typically a positive development, but it is in Sirius XM's case as it can use the money in part to lower its gargantuan share count. 

Give me Liberty or give me breadth
Part of Sirius XM's buyback efforts have involved purchasing some of Liberty Media's majority stake in the company. The plan was put on hold when Liberty Media made a buyout proposal in January, but it was clear that retail investors weren't going to approve the transaction, so Liberty Media bowed out in March. 

The ownership clarity gives Sirius XM the green light to continue to buy back stock from Liberty Media as it chows down its own shares, and on Monday it was announced that Sirius XM completed the purchase of $500 worth of its stock owned by Liberty Media. 

Investors hungry for a little more color on the transaction or what Liberty Media's plans are with Sirius XM may not have to wait long. Liberty Media reports quarterly results on Thursday, and it's a fair bet that the satellite-radio darling will come up either during prepared remarks or when analysts get a shot to ask questions.  

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Rick Munarriz

Rick has been writing for Motley Fool since 1995 where he's a Consumer and Tech Stocks Specialist. Yes, that's a long time. He's been an analyst for Motley Fool Rule Breakers and a portfolio lead analyst for Motley Fool Supernova since each newsletter service's inception. He earned his BBA and MBA from the University of Miami, and he now lives a block from his alma mater.

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Related Tickers

8/31/2015 4:00 PM
LMCA $37.25 Down -0.13 -0.35%
Liberty Media CAPS Rating: ****
SIRI $3.82 Down -0.02 -0.39%
Sirius XM Radio CAPS Rating: ***