XM Satellite Radio
closed Thursday on a $150 million secondary offering of stock. The Washington-based XM plans to use the money for the construction of XM-4, its new ground spare satellite, if insurance proceeds are not received in a “timely manner.”
XM is currently negotiating with its insurer over a $400 million claim on its two orbiting satellites, named “Rock” and “Roll.” The company says the two satellites are not generating enough power, but the insurer claims Rock and Roll are performing above their insured level. The insurer also says XM has violated under provisions of its insurance policy.
If XM wins its claim, the company expects use the proceeds of the offering for working capital and general corporate purposes, which may include the repurchase or pre-payment of outstanding debt.
XM raised the money by selling 11.3 million shares of its Class A Common Stock to Legg Mason Funds Management of Baltimore and another large institutional investor, each on behalf of its investment advisory clients.
XM’s insurance claim contends the two satellites are not operating properly because of defective mirrors which are not generating enough light into the satellites’ solar panels.
If operating properly, both satellites have a life span of 17 years, but the operating problems may force XM to ground them by 2008. Both were launched in 2001.