SIRIUS XM Radio (NASDAQ: SIRI) is getting on the debt refinance game. The company’s XM Satellite Radio subsidiary is offering up to $550 million of senior notes that will mature in 2018 via a private placement. SIRIUS said that XM will use the proceeds of the offering along with cash on hand to repurchase its 11.25% senior secured Notes due 2013, which are being tendered. The use of proceeds assumes that the tender offer and consent solicitation are completed. Other use of funds will be to pay fees and expenses associated with the transactions.
This is an obvious debt refinancing transaction. The new notes in the unregistered private placement will be senior unsecured notes and they are replacing secured notes. The new notes will be guaranteed on a senior unsecured basis by certain of XM’s existing and future subsidiaries. If the tender offer and consent solicitation are not completed, XM intends to use the proceeds for general corporate purposes. The company also notes that it may include the repayment of debt.
The notes have not been and will not be registered and may not be offered or sold in the United States unless there is a registration or an exemption from the registration requirements of the Securities Act and applicable state securities laws.
It will be interesting to see what the deal prices at on a spread to Treasuries. Still, chances are that the company won’t be paying 11.25%. The debt maturity schedule also will be getting pushed out here from 2013 to 2018. With rates as low as they are and with the improvements seen at the company, Mel Karmazin might as well save some cash and extend out some debt maturities.
In a different release, SIRIUS XM ended the quarter with 19.9 million subscribers since it added 334,000 subscribers during the last quarter. The breakdown is 10.2 million for XM and 9.64 million for SIRIUS. For the full year, SIRIUS XM said it is targeting 20.1 million subscribers.
JON C. OGG
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