Goldman Sachs has issued a research report noting that Sirius Satellite Radio (NASDAQ: SIRI) and XM Satellite Radio (NASDAQ: XMSR) are likely going to need to raise capital.
The note projects that it believes the combined companies may need to raise $500 million to $1 Billion on top of the need to refinance $1.46 Billion in putable debt that XM has, or $1.06 Billion if some debt is converted. This puts the estimated time frame as soon as Q3 2008 but more likely by Q1 2009.
Goldman Sachs noted that the companies can both get through 2008, but not comfortably given the $120 million MLB escrow funding and pending maturities in 2009.
Their belief is that the capital raise is tangible based on declining cash cushions, contract cash payments, compensating balance requirements, merger integration costs, putable debt, existing debt servicing and maturities.
Jon C. Ogg
May 22, 2008