SIRIUS XM Gets Huge Debt Retirement Savings

SIRIUS XM Radio Inc. (NASDAQ: SIRI) is playing the low interest rate game by swapping old expensive debt for new cheaper debt. This has been done before by Mel Karmazin and friends, but the new lower rates are offering a massive reduction in the cost of capital for junk bond issuers like SIRIUS and many other firms.

The satellite radio monopoly announced that on September 20 it will redeem all of its outstanding 13% senior notes due 2013. As of August 21, 2012, a sum of $681,517,000 of the 13% notes is outstanding. Pro forma for the 13% notes redemption, the previously announced redemption of its 9.75% senior secured notes due 2015 and the issuance on August 13, 2012 of $400,000,000 of 5.25% senior notes due 2022, SIRIUS XM would have had $2,441,095,000 of total long-term debt as of June 30, 2012.

The company's chief financial officer said that the successful issuance of the 5.25% notes and its strong cash position allows SIRIUS to retire all of the 13% notes more than 10 months prior to maturity. After this redemption, SIRIUS XM will not have a note maturity all the way out to December 1, 2014.

Today's news had been somewhat telegraphed, but it is amazing to see that a company like SIRIUS XM Radio can issue 5.25% debt. That is what an extremely low-rate Treasury environment and a high demand for high yield debt can offer companies.

SIRIUS shares are up 1.5% at $2.60 in premarket trading and the 52-week high is $2.64.

JON C. OGG

Filed under: 24/7 Wall St. Wire, Bonds, Media, Satellite Tagged: featured, SIRI