Satellite radio provider SiriusXM has sought to take advantage of it stronger financial position by raising new bank debt and returning cash to its shareholders.
In the space of two days the company revealed that it has secured a new US$1.25bn five-year…
Satellite radio provider SiriusXM has sought to take advantage of it stronger financial position by raising new bank debt and returning cash to its shareholders.
In the space of two days the company revealed that it has secured a new US$1.25bn five-year senior secured revolving credit facility and that its board of directors has approved both a US$2bn share buyback plan and US$325m special dividend.
SiriusXM stated that proceeds from the revolver will be used for working capital and other general corporate purposes, including the share repurchase and dividend.
JP Morgan Chase is the administrative agent on the facility as well as joint bookrunner alongside Merrill Lynch, Citigroup, Deutsche Bank, Morgan Stanley, Barclays, BNP Paribas, Credit Agricole CIB, RBC, RBS, SunTrust Robinson Humphrey and Wells Fargo.
Commenting on the credit agreement, David Frear, SiriusXM’s chief financial officer, said: “SiriusXM’s credit quality has rapidly improved and we are pleased that the bank market has recognized that fact by oversubscribing the deal, allowing us to upsize the facility to US$1.25bn.
“This new facility will allow us to continue to drive down average borrowing costs and more tightly manage cash and debt balances and it further strengthens our balance sheet by providing a substantial and readily available source of liquidity for strategic opportunities, including the return of capital to shareholders and acquisitions.”
To that end, SiriusXM is to pay a special cash dividend of US$0.05 per share of common stock on 28 December 2012, equating to a total dividend of approximately US$325m.
The US$2bn stock repurchase program will take place from time to time during 2013 through both open market and privately negotiated transactions. The company’s largest shareholder, Liberty Media, which is in the process of seeking to take de jure control of SiriusXM, has indicated that it will participate in the share repurchases on a pro rata basis so that its relative ownership interest, presently 49.8%, will not be affected by the program.
Liberty is currently awaiting FCC approval before it converts its preferred shares and launches a full takeover bid for SiriusXM. Its actions are thought to be the predominant factor in the decision by SiriusXM CEO Mel Karmazin to leave the company in 2013.
Indeed, both the share repurchase plan and special dividend are a product of Liberty’s increasing influence on the SiriusXM board. Earlier this year, Liberty CEO Greg Maffei told analysts that there was plenty of scope for further financings in order to return cash to SiriusXM’s shareholders.
“Our view is that Sirius is underleveraged and there’s plenty of opportunity for share repurchases and other financial actions of the company which we deem as ultimately positive… We’ve noted that there is flexibility in the capital structure at Sirius, there’s plenty of availability for them over the short-term to lever further and return capital to shareholders including ourselves,” Maffei said.
According to ratings agency Standard & Poor’s, SiriusXM’s lease-adjusted gross debt-to-EBITDA ratio declined to 2.9x as of 30 September 2012, from 4.5x a year ago. The company has around US$556m of cash-on-hand.
