After an impressive earnings call what could Sirius XM (SIRI) do to keep the proverbial ball in a bullish trend rolling? The answer came today when the company announced its intention to offer $400 million in senior notes due in 2022.
At first blush this may seem like added debt, but it is not likely the case. The company intends to use the net proceeds from the offering for general corporate purposes, which may include, from time to time and as market conditions warrant, the repurchase, redemption, defeasance, tender or repayment of our outstanding indebtedness, including the 13% Senior Notes due 2013. Pending application of these amounts as provided above, the company currently expects to maintain any excess amount as cash on hand.
In essence the company is trying to get rid of high interest debt and replacing it with much lower interest debt which is due way out in 2022. There is $618,517,000 on the books for the 13% notes of which Liberty Media (LMCA) $76,000,000.
This is a tremendous move for Sirius XM as it helps with many metrics including cash flow. The company should still be at about a 3 to 1 debt to EBITDA ratio when the transaction is complete. Yes, it will cost some premium to retire the notes, but this move is very bullish and improves an already impressive outlook for Sirius XM.
With the 13% debt retired and with the recent announcement of the intention to repay all of the $186 million of the 9.75% notes due in 2015, the company's highest percentage debt will be the $800 million in 8.75% notes due in 2015. This essentially removes all debt issues for 2013 and leaves the company with a very manageable debt situation.