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Related Issuers
Rating Action:

Moody's Assigns Ba3 to Sirius XM's Proposed Senior Unsecured Notes; Ba3 CFR Affirmed

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.
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