Aug 21 - Standard & Poor’s Ratings Services said today that its rating on Sirius XM Radio Inc. (BB/Stable/--) is not currently affected by Liberty Media Corp.’s announcement of its plan to increase its stake in Sirius XM to more than 50% from 48%, subject to Federal Communications Commission approval. The increase in its holdings would give control of Sirius XM to Liberty Media. There is significant uncertainty in relation to the financial policy that Liberty would pursue if it controls the board of Sirius XM. Sirius XM’s gross debt to EBITDA, pro forma for the announced redemption of its 9.75% senior secured notes and 13% senior notes, declined to 3.0x as of June 30, 2012 from 4.4x as of June 30, 2011 as a result of good operating performance supported by subscriber growth and the January 2012 price increase, as well as debt reduction.
Without potential debt-financed share repurchases, we believe continued improvement in profitability will result in a further reduction in gross debt leverage to roughly 2.75x by year-end 2012, which we view as one element of an upgrade scenario to ‘BB+'. We now believe an upgrade is unlikely in the near term until Liberty Media’s potential impact on Sirius XM’s business and financial strategies can be more clearly outlined. Although not currently expected, we could lower our rating to ‘BB-’ if we are convinced Sirius XM will adopt a more aggressive financial policy that elevates debt gross debt leverage to 5.5x.