S&P Hikes SIRIUS XM Rating, Not Just On Howard Stern (SIRI)

SIRIUS XM Radio Inc. (NASDAQ: SIRI) was already in the news all week after Howard Stern announced that he will be staying on the air in a new five-year pact with the satellite radio monopoly.  That is not the sole basis for the momentum here, but Standard & Poor’s has just raised the company’s corporate credit ratings.  This is not yet investment grade, but the raised rating is now “BB-” versus a prior “B+” rating.

The report noted that EBITDA generation and debt leverage have improved, subscriber growth has remained, it has made selective price hikes, and it has cut costs.  S&P further noted that the progress in credit quality is sustainable.  Another aid is that auto sales growth and recovery in the auto sector will aid in subscription growth ahead.

The report does note that its financial ratios are high and the growth and the model is not without risk.  As far as the Howard Stern angle, S&P’s report noted that Stern’s contract may have been high but his departure would have likely driven up churn rates and created other uncertainty.  Overall, it is a positive call and S&P has assigned a “stable” outlook for SIRIUS XM.

SIRIUS shares went from flat to marginally negative to up a penny at $1.40 on the news.  Today’s volume is anemic compared to yesterday’s 188 million on the news of the Stern contract that took shares from $1.32 to $1.39.

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JON C. OGG