The successful sale of an expanded $800 million bond issue by Sirius XM impressed Moody’s Investors Service. It has given the satellite radio company’s credit ratings an upgrade.
Moody’s announced that it had upgraded Sirius XM Radio Inc.’s new 8.75% senior unsecured notes due 2015 to Caa1 from Caa2 and its 9.75% senior secured notes due 2015 to B1 from B2 following the upsize of the offering to $800 million from $550 million.
Sirius XM said it plans to utilize the incremental net proceeds to repay its $244 million senior secured term loan due 2012 and for general corporate purposes. “The upgrades reflect the elimination of the senior secured credit facility, which has a first priority lien on Sirius XM’s assets and a senior position in the capital structure relative to the proposed 2015 notes and the existing 9.75% notes. Eliminating the first priority lien loan enhances the recovery prospects of the remaining debt instruments in the event of a default, which drives the upgrade,” Moody’s stated.
The transaction does not affect Sirius XM’s Caa1 Corporate Family Rating, B3 Probability of Default Rating or SGL-2 speculative-grade liquidity rating or XM Radio’s ratings. “The rating outlook remains stable,” Moody’s said.
RBR-TVBR observation: As tough as it is to find bank financing, the high yield bond markets are certainly inviting to broadcasters. The pricing on this Sirius XM sale was pretty attractive. Several radio and TV companies have also tapped the high yield bond markets in recent months and we expect to see more do so through the rest of 2010. Unfortunately, you have to be a pretty big broadcaster, say needing at least $100 million, in order to tap this source of money.