SIRIUS Cautious Praise At S&P (SIRI)

SIRIUS XM Radio Inc. (NASDAQ: SIRI) has been reaffirmed on its corporate debt rating at “B-” late in the day.  While this is still very deep in “junk bond” territory at S&P, the outlook has been revised to positive from stable.  This is after the earnings that we called mostly headed in the right direction last week, but it follows a relatively recent mid-August upgrade by S&P and it is fairly rare to see another call this fast on a controversial stock (and company) like Sirius.  Still, there are some mixed notions in the call as the rating is so far from investment grade status.

The call was based upon EBITDA generation and discretionary cash flow improving on operating synergies and integration cost savings.  The call also reflects prospects for continued improvement in operating performance and declining debt leverage.  While that is not a promise of a further upgrade, it leaves a hint or review for more ahead.

The rating does reflect a high debt leverage and its dependence on weak U.S. auto sales, and modest discretionary cash flow.  Its status as the only satellite radio player and ongoing synergies and cost savings are modest positives, but S&P’s Hal Diamond noted that those strengths do not offset the risks in its “B-” rating.

Sirius XM Radio has a total debt level as of September 30 of $3.4 billion.  Shares closed up 1.6% at $0.63 today, but on very light trading volume.

You can join our open email distribution list which goes out several times per week to be notified of key analyst calls, top early morning day trader alerts, along with news of IPO’s, key offerings, merger news, guru investor data on Buffett and others, mergers, and more.

JON C. OGG