SIRIUS XM Radio Inc. (NASDAQ: SIRI) keeps getting credit rating upgrades. This time it was S&P which upgraded SIRIUS XM and the junk-rated company is getting closer and closer to investment grade.
S&P’s hike took the rating to “BB” and the outlook is stable from “BB-” rating. Reasons cited are improved EBITDA, lower debt leverage, improved discretionary cash flow, higher subscriber growth, and rising EBITDA margins. More importantly, S&P called for a continued recovery in auto sales supporting revenue growth.
Another citation was noted that SIRIUS XM will continue to cut its gross adjusted debt leverage down to “the mid-3x area” by what should be the end of the year 2012 because of EBITDA growth.
One more positive is that, despite S&P cautioning that the company faces significant hurdles to maintaining consistent growth,” it did not exactly warn that Pandora Media, Inc. (NYSE: P) was about to give SIRIUS XM a serious run for its money even though more cars are starting to become “Pandora-enabled” in ads.
SIRIUS XM has been able to keep ratcheting down its borrowing costs and the irony of a credit rating upgrade is that these sort of moves generally allow for cheaper and cheaper borrowing rates in the future.
JON C. OGG
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