Oct 24 - Standard & Poor's Ratings Services said today that its rating and
outlook on Sirius XM Radio Inc. (BB/Stable/--) is not currently
affected by the announcement that the company's CEO will depart on Feb. 1, 2013.
Liberty Media Corp. plans to increase its stake in Sirius XM to more than 50%
from 49.5%, gaining a controlling position, subject to Federal Communications
Commission approval. We believe Liberty could pursue a more aggressive financial
policy if it controls the board of Sirius XM. We anticipate that as a result,
debt leverage could increase over the near term, and could also increase if
Liberty Media's ownership input leads to debt-financed dividends, acquisitions,
and/or share repurchases. However, at this time we do not believe leverage will
increase above our 4.5x target for the current rating.
Sirius XM's lease-adjusted gross debt-to-EBITDA ratio, pro forma for the
September 2012 redemption of its 9.75% senior secured notes and 13% senior
notes, declined to 3.2x as of June 30, 2012, from 4.5x as of June 30, 2011, as
a result of good operating performance supported by 9% growth in subscribers
and the 12% price increase for its basic monthly service in January 2012. We
also believe that Liberty Media's likely control of Sirius XM could result in
more aggressive pricing and evolving digital strategies, the effect of which
may not be clear for some time.
Although not currently expected, we could lower our rating to 'BB-' if we are
convinced Sirius XM will adopt a more aggressive financial policy that
elevates gross debt leverage to over 4.5x on a sustained basis. We currently
do not see upgrade potential over the intermediate term until more clarity
emerges regarding Liberty's future role and strategies.