Moody's Outlines Default Risks For SIRIUS (SIRI)

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As if you didn’t know there were problems at SIRIUS XM Radio Inc. (NASDAQ: SIRI), Moody’s has decided in its infinite wisdom to downgrade the company’s debt ratings.

This downgrade is showing an increased probability of a default. It lowered its corporate family rating to "Ca" from "Caa1."  The company’s rating outlook is negative and its speculative grade liquidity rating remains at SGL-4, indicating poor liquidity.

According to Moody’s, "With nearly $1.0 billion of its $3.3 billiontotal debt coming due in the New Year ($190 million in February, $350million in May and $433 million in December), and given the currentbackground of capital market dislocation and the company’s poorliquidity situation, the rating actions anticipate that Sirius will beunable to repay or refinance its maturing debts without negotiatingsome sort of compromise arrangement with at least a portion of theaffected constituents."  Sirius has already initiated transactions to refinance portions of its debt. Moody’s considers these transactions as being analogous to a distressed exchange.

Moody’s outlined the rest of the cuts, but frankly there is nothingreally new here.  It just underscores the notion that the overseers aregrowing more worried and that their confidence is reflective oftoday’s price.  Too bad they had to wait until shares were at $0.12before making the call.

Jon C. Ogg
December 23, 2008