Satellite radio provider Sirius XM has raised US$600m through a bond offering of 5.75% senior notes due 2021.
The new notes, which priced at par, were sold to institutional investors outside of the United States. They are covenant-lite with no…
Satellite radio provider Sirius XM has raised US$600m through a bond offering of 5.75% senior notes due 2021.
The new notes, which priced at par, were sold to institutional investors outside of the United States. They are covenant-lite with no limitations on restricted payments nor debt issuances and are rated B1 by Moody’s.
SatelliteFinance understands that the lead managers and bookrunners on the offering are BofA Merrill Lynch, Deutsche Bank, JP Morgan, Citigroup, Credit Agricole, Morgan Stanley and SunTrust Robinson Humphrey.
Net proceeds from financing are to be used along with cash on hand to redeem the company’s US$753m outstanding of 8.75% senior notes due 2015.
The move is part of Sirius’ ongoing strategy of refinancing much of its existing debt in order to push out maturities and lower interest payments.
A combination of buoyant bond markets and the company being in a far stronger financial position than it was when it first secured the debt has enabled Sirius to replace the majority of its previous facilities with new covenant-lite, lower interest notes.
After redeeming the 8.75% senior notes due 2015, Sirius has two pieces of higher interest debt that it will likely look to replace. There remains US$540m outstanding of 7.625% senior notes but as these are not due until 2018 so it has some time. The more pressing issue is the US$502.37m of 7% exchangeable senior subordinated notes that are due in 2014.
Back in February 2013, Sirius launched a compulsory redemption offer for the notes as a result of Liberty Media increasing its shareholding to over 50% and therefore triggering a fundamental change under the debt’s terms. However, only 8.7% of the noteholders agreed to exchange their debt for shares, at 38.138 shares per note.
One analyst told SatelliteFinance that such a response was expected given the continued rise in Sirius’ share price, which has increased by more than 70% in the past year. It was therefore logical for the bondholders to retain their positions until maturity unless Sirius offers them a hefty premium.
The share price is likely to continue on its upward trajectory with the company in the midst of a significant share buyback plan, driven in part by majority shareholder Liberty seeking to get a return on its investment.
Since the beginning of 2013, Sirius has repurchased roughly US$1.3bn of common stock on the open market under its US$2bn share repurchase program. And the analyst expects management to continue this strategy and announce a new buyback plan later this year, funded through both existing cash and new notes.
As of 30 June 2013, Sirius’ had a leverage of approximately 3.2x debt-to-EBITDA and estimated free cash flow of around US$800m over the next 12 months. Management has a long term leverage target of 3.5 times.
In its second quarter results, Sirius reported record revenue of US$940m, up 12% year-on-year, and adjusted EBITDA of US$283m, up 19% on Q2 2012. As of 30 June 2013, the company had 25.1 million subscribers, including 20.3 million self-pay subscribers.
