Cash-strapped satellite radio broadcaster Sirius Satellite has dodged a potential bankruptcy filing with a refinancing package that includes $200 million.
At a special meeting in New York this week, about 68 percent of the company’s stockholders voted to approve transactions to exchange approximately $700 million worth of debt for common stock and $519 million in preferred stock for common stock and warrants, the company said. In addition, stockholders voted to increase the authorized shares of common stock from 500 million to 2.5 billion.
The recapitalization included raising $200 million in additional cash through the sale of newly-issued common stock. It all adds up to a start-up that is able to remain a going concern and fund its operations, including building on its 30,000 so-far enthusiastic subscribers.
Chipping in on the $200 million were affiliates of OppenheimerFunds, ($150 million), Apollo Management ($25 million) and The Blackstone Group ($25 million). After the transaction clears, affiliates of Apollo and Blackstone are expected to swap their existing convertible preferred stock for newly-issued shares of common stock and warrants to purchase common stock.
After some delays and technical glitches, Sirius launched its national satellite radio service in July of 2002. But by then the New York-based Sirius was chasing its only competitor in the nascent industry, XM Radio Holdings . XM said it expects to exceed 1 million subscribers by the end of 2003. Sirius has said it is looking to add 300,000 new subscribers to its rolls by then.
Sirius has said it needs to reach two million subscribers by 2005 in order to hit break-even, though analysts have cited three million as the magic number.
For all their differences in subscribers, and differences with the types of satellite technology deployed, both companies’ share one issue: they need cash. Both companies have sunk about $1 billion into their ventures, and both are working to hold down their monthly cash burn, estimated to be around $100 million.
XM has scheduled a special shareholders meeting for March 27th in order
to get approval to increase the number of common shares in the company,
which was tied to its own recent $475 million financing package that closed on
January 28th.
And both companies’ got a boost recently on positive articles in the business press about both Sirius’s $12.95 monthly service for extensive radio content, and XM’s $9.95 radio service. By stepping in once again to help finance Sirius, its investors are signaling they think that subscription-based, go-anywhere satellite radio is a viable market.
Shares of Sirius were down by just under 4 percent to 51 cents Thursday during midday trading a day after the transaction was announced.
