S&P Raises SIRIUS Rating Outlook

Tuesday, September 12, 2006

S&P's outlook for SIRIUS was recently raised. It is still rated at CCC and the bonds still have a 9.722% current yield. The bond rating is important because the outstanding bonds are callable, which means that SIRIUS can redeem them whenever they want. In the case that SIRIUS continues it's financial progress and is eventually upgraded above a CCC it will be able to borrow at a lower rate (B ratings can typically borrow at 6.5% right now), which it would do and then use the proceeds of that bond issue to pay down the existing (expensive) bonds. Doing so would save them $40M+ / year in interest costs.

"Standard & Poor's Ratings Services raised its outlook on Sirius Satellite Radio Inc., citing the company's growing subscription base.

Last month, Sirius said it added 600,460 net subscribers in the second quarter, for a total of 4.68 million subscribers as of June 30. The company also raised its annual forecast to 6.3 million subscribers, up from its previous forecast of 6.2 million.

Standard & Poor's also affirmed Sirius's "CCC" rating on its corporate debt. "CCC," known as "junk" grade debt, indicates a high risk of default. The Manhattan-based satellite radio provider had about $1.1 billion in outstanding debt as of June 30."

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