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I AGREE
03 Mar 2015
$750 million of new rated debt
New York, March 03, 2015 -- Moody's Investors Service ("Moody's") assigned Ba3 to Sirius XM Radio
Inc.'s ("Sirius") proposed $750 million senior unsecured
notes. Net proceeds from the new notes will be used for general
corporate purposes including the repayment of advances under the company's
unrated $1.25 billion senior secured revolving credit facility
($635 million as of March 2, 2015) and share repurchases.
In addition, Moody's upgraded instrument ratings on the company's
senior unsecured notes to Ba3 reflecting the change in debt mix resulting
in a lower percentage of secured debt in the company's debt capital
and our expectation that future debt issuances will further lower the
percentage of secured debt. Moody's also affirmed the company's
Ba3 Corporate Family Rating (CFR), Ba3-PD Probability of
Default Rating and SGL-1 liquidity rating. The rating outlook
is stable.
..Issuer: Sirius XM Radio Inc.
Assigned:
......NEW $750 million
Senior Unsecured Notes: Assigned Ba3, LGD4
Affirmed:
....Corporate Family Rating: Affirmed
Ba3
....Probability of Default Rating: Affirmed
Ba3-PD
....Speculative Grade Liquidity Rating:
Affirmed SGL - 1
......5.25% sr
secured notes due 2022 ($400 million outstanding): Affirmed
Baa3, LGD1
Upgraded:
......4.25% sr
unsecured notes due 2020 ($500 million outstanding): Upgraded
to Ba3, LGD4
......5.875% sr
unsecured notes due 2020 ($650 million outstanding): Upgraded
to Ba3, LGD4
......5.75% sr
unsecured notes due 2021 ($600 million outstanding): Upgraded
to Ba3, LGD4
......4.625% sr
unsecured notes due 2023 ($500 million outstanding): Upgraded
to Ba3, LGD4
......6.0% sr
unsecured notes due 2024 ($1,500 million outstanding):
Upgraded to Ba3, LGD4
Outlook:
..Issuer: Sirius XM Radio Inc.
......Outlook is Stable
RATINGS RATIONALE
Sirius' Ba3 corporate family rating incorporates moderate leverage (estimated
3.6x debt-to-EBITDA as of December 31, 2014,
including Moody's standard adjustments and pro forma for the new notes)
and expectations for free cash flow of more than $1.1 billion,
or more than 20% of debt balances over the next 12 months despite
the increase in funded debt. The company generates good EBITDA
margins and has high conversion to free cash flow, but the bulk
of excess cash has been directed to share buybacks. Since December
2012, the company will have increased debt balances by roughly $2.4
billion and boosted common stock repurchases to $4.3 billion
under $6 billion of common share repurchase programs. Despite
the increase in debt-to-EBITDA from 2.8x as of March
31, 2013, leverage ratios along with other credit metrics
remain within its Ba3 rating; however, ratings are constrained
by Moody's expectation that the company will continue to fund share repurchases
by increasing debt balances to levels approaching its 4.0x reported
leverage target. Additionally, Moody's expects the pace of
revenue growth to be muted reflecting slower increases in the delivery
of new automobiles and by 1.8% - 1.9%
monthly churn on a larger base of subscribers. Looking forward,
free cash flow will be reduced potentially by higher interest payments
on growing debt balances and by spending on satellite replacements beginning
towards the end of 2016 followed by increased tax payments when NOL's
are exhausted sometime in 2019. Ownership by Liberty Media also
presents event risk given Liberty Media's track record for acquisitions
and shareholder friendly transactions. The Ba3 CFR reflects Moody's
expectations that, despite the likelihood for higher debt balances
to fund distributions, the self-pay subscriber base and operating
performance of Sirius will be supported over the next 12 months by sustained
deliveries of light vehicles in the U.S. and by subscriber
additions from the used car segment. Liquidity is strong with good
availability under the $1.25 billion revolving credit facility
and no significant debt maturities until 2017 when the revolver expires.
Sirius has positioned itself for enhanced financial flexibility,
and notes issued since the beginning of 2013 are high yield-lite
with no limitations on restricted payments nor debt issuances.
Although the 5.25% notes issued in 2012 came with a 3.50x
leverage ratio incurrence test for restricted payments (other than what
was allowed under its builder basket and carve outs) among other limitations,
these notes were provided collateral in 2014 and were upgraded to investment
grade resulting in the falling away of these incurrence tests.
In November 2013, Sirius also formed a new holding company with
the potential for being an additional issuer of debt.
The upgrade in the instrument ratings of the senior unsecured notes to
Ba3 reflects the change in debt mix which results in a lower percentage
of secured debt and Moody's expectation that future debt issuances will
further lower the percentage of secured debt in the company's debt capital.
In a scenario in which the percentage of secured debt commitments increases
above current levels, there would be downward pressure on the instrument
ratings of the senior unsecured notes. The stable outlook reflects
Moody's view that Sirius will increase its self-pay subscriber
base due to sustained demand for new vehicles in the U.S.
and growing availability of satellite radio in used cars both of which
will result in higher revenue and EBITDA. The outlook incorporates
Sirius maintaining good liquidity, even during periods of satellite
construction, the potential for leverage to increase above current
levels consistent with management's 4.0x reported leverage target,
and the likelihood of share repurchases or additional dividends being
funded from revolver advances, new debt issuances, or free
cash flow. The outlook does not incorporate leveraging transactions
or a level of shareholder distributions that would negatively impact liquidity
or sustain debt-to-EBITDA ratios above 4.25x (including
Moody's standard adjustments). Ratings could be downgraded if Moody's
expects debt-to-EBITDA ratios will be sustained above 4.25x
(including Moody's standard adjustments) or if free cash flow generation
falls below targeted levels as a result of subscriber losses due to a
potentially weak economy or migration to competing media services or due
to functional problems with satellite operations. A weakening of
Sirius' liquidity position below expected levels as a result of share
repurchases, dividends, capital spending, or additional
acquisitions could also lead to a downgrade. Ratings could be upgraded
if management demonstrates a commitment to balance debt holder returns
with those of its shareholders. We would also need assurances that
the company will operate in a financially prudent manner consistent with
a higher rating including sustaining debt-to-EBITDA ratios
below 3.25x (including Moody's standard adjustments) and free cash
flow-to-debt ratios above 12% even during periods
of satellite construction.
The principal methodology used in these ratings was Global Broadcast and
Advertising Related Industries published in May 2012. Other methodologies
used include Loss Given Default for Speculative-Grade Non-Financial
Companies in the U.S., Canada and EMEA published in
June 2009. Please see the Credit Policy page on www.moodys.com
for a copy of these methodologies.
Sirius XM Holdings Inc., headquartered in New York,
NY, provides satellite radio services in the United States and Canada.
The company creates and broadcasts commercial-free music;
premier sports talk and live events; comedy; news; exclusive
talk and entertainment; and comprehensive Latin music, sports
and talk programming. SiriusXM services are available in vehicles
from every major car company in the U.S., and programming
is also available online as well as through applications for smartphones
and other connected devices. The company holds a 37% interest
in SiriusXM Canada which has more than 2 million subscribers. Sirius
is publicly traded and a controlled company of Liberty Media Corporation
which owns roughly 57% of Sirius common shares. Apart from
Sirius XM Canada, Sirius reported 27.3 million subscribers,
including 22.5 million self-pay subscribers, at the
end of December 2014 and generated revenue of $4.2 billion
for the trailing 12 months ended December 31, 2014.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides certain regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Carl Salas
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
John C Diaz
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Assigns Ba3 to Sirius XM's Proposed Senior Unsecured Notes; Ba3 CFR Affirmed
No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.
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