Sirius Satellite Radio has announced a transaction that will provide it with a financial plan that may give them millions of dollars in new capital and more to eliminate debt. The satellite radio network says the cash infusion will give the company the strongest balance sheet in the industry.
On Thursday, the company announced a far-reaching agreement with holders of more than $1 billion of its debt and preferred stock, to convert substantially all of its approximately $700 million of debt and all of its $525 million of preferred stock into common stock, and raise $200 million from the sale of newly-issued common stock.
The recapitalization will dramatically reduce the company's additional funding needs. The additional $200 million, combined with the approximately $240 million cash currently on-hand, is expected to give Sirius sufficient cash to operate into the second quarter of 2004, based upon its current business plan. Furthermore, the company continues to evaluate initiatives that could enable it to achieve cash flow breakeven without raising additional funds.
The new cash infusion will be provided by Oppenheimer global funds ($150 million) and affiliates of Apollo Management, L.P. ($25 million) and The Blackstone Group L.P. ($25 million). Upon completion of the transaction, affiliates of Apollo Management, L.P. and The Blackstone Group L.P. will exchange all of their existing convertible preferred stock for shares of common stock and warrants to purchase common stock.
When the transaction is completed, and assuming all debt and preferred stock is converted into equity, Sirius' debt will be exchanged for 62 percent of the common stock, the existing preferred stock will be exchanged for 8 percent of the common stock, the providers of new funds will own 22 percent of the common stock, and the existing common stock will retain 8 percent of the recapitalized equity. Existing preferred stockholders will also receive warrants to purchase 9.1 percent of the common stock at an average strike price of just under $1.
UBS Warburg is advising the company on the transaction.
DaimlerChrysler has announced plans to offer Sirius radios in 16 models of Chrysler, Dodge and Jeep vehicles beginning this fall. Ford is planning to offer Sirius in select vehicle lines sold in the United States, including Ford, Lincoln, Mercury, Mazda, Land Rover, Jaguar, Volvo and Aston Martin. BMW has announced plans to offer Sirius radios as an accessory in its most popular models through BMW centers across the country, including select BMW 3 Series, 5 Series, X5 vehicles, and in MINI vehicles through MINI dealerships. Nissan is currently offering Sirius radios in the 2003 Nissan Pathfinder SUV and has announced plans to offer Sirius radios as an option this fall on numerous Infiniti and Nissan 2003 models. Future Audi and Volkswagen models will also offer Sirius.