SIRIUS XM Trades Equity For Debt, A Penny at a Time (SIRI)

SIRUS XM Radio Inc. (NASDAQ: SIRI) issued a statement after the close showing how the company is taking tiny steps to trim its debt balances.  Every penny of debt it can shed helps its overall negotiating position with creditors as it seeks to refinance.  Unfortunately, this comes with only more dilution to common shareholders.

The company plans to issue an aggregate of 100,000,000 shares of common stock in exchangefor $13,000,000 principal amount of its 2.50% convertible notes due2009 beneficially owned by institutional holders. After the exchanges,SIRIUS XM said it will have $174,588,000 aggregate principal amount ofthe notes that will still remain outstanding.

The company will not receive any cash proceeds.  The notes exchanged will be retired and canceled.

The company stated that it executed these transactions to cut debt andinterest costs, increase equity, and improve the balance sheet.   MelKarmazin and friends are willing to do more of these deals.The filing stated, “We may engage in additional exchanges in respect ofour outstanding indebtedness if and as favorable opportunities arise.”In other words, if you are a noteholder you can probably reach a dealwith the company.  If you want to.

Jon C. Ogg
January 14, 2009