S&P turns positive on Sirius XM


Standard & Poor’s Ratings Services revised its rating outlook on Sirius XM Radio to positive from stable. S&P said the change reflected the satellite radio company’s improving operating performance, declining debt leverage, and prospects for continued strengthening in credit measures for 2011.

S&P also affirmed the ratings on the company and its XM Satellite Radio Inc. subsidiary, including the ‘BB-‘ corporate credit rating. Sirius XM had total debt outstanding of $3.1 billion as of March 31, 2011.

“The ‘BB-‘ rating on Sirius XM reflects Standard & Poor’s expectation that revenue and EBITDA will increase in 2011, resulting in debt leverage in the low-4x range and interest coverage in the low- to mid-2x range,” the ratings agency said.

“Sirius XM is the only US satellite radio operator, but it faces significant hurdles to maintaining consistent, long-term growth, including the need to broaden subscriber demand and reduce churn in line with other satellite entertainment providers,” said Standard & Poor’s credit analyst Hal Diamond.

Sirius XM derives almost all of its revenue from subscription fees, S&P noted. Revenue growth is largely a function of new subscriber additions, which is heavily dependent on new auto sales and, to a lesser extent, selective price increases that may aggravate churn. Further long-term risks relate to maintaining subscriber growth during a period of increasing competition from online audio services, and delivering a compelling program lineup at reasonable cost.