Impact Of New Sirius XM Debt On Earnings

By Crunching Numbers:

This week Sirius XM Radio (SIRI) announced that it is offering $ 600 million of 5.75% Senior Notes due 2021. The announcement states, in part,

The company will receive gross proceeds of $ 600 million from the sale of the notes before deducting the initial purchasers’ commissions and estimated offering fees and expenses.

SiriusXM intends to use the net proceeds of the offering, together with cash on hand, to redeem its outstanding 8.75% Senior Notes due 2015.

This would appear to be very good news for Sirius XM investors. Use cash on hand and proceeds from a new offering to pay off older debt carrying an interest rate 3 percentage points higher than the new debt, while at the same time extending the maturity by six and a half years. The 8.75% debt carries annual interest payments of $ 70 million. The new debt will have annual interest payments of $ 34.5 million,

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