Wednesday, February 21, 2007

Moody's On Merger: Revenue & Cost Synergies Could Provide Upward Momentum To Its Rating

The following is a press release from Moody's Investors Service:

Moody's Changes Xm's Outlook To Developing From Stable:

New York, February 21, 2007 -- Moody's Investors Service affirmed the existing debt ratings of XM Satellite Radio Holdings, Inc. ("XM") and its subsidiary XM Satellite Radio, Inc. and changed the outlook to developing from stable in connection with the company's February 19, 2007 announcement that XM and SIRIUS Satellite Radio, Inc. ("SIRIUS") have entered into a definitive merger agreement. The proposed transaction will combine the two companies in a tax-free, all-stock merger of equals with a combined enterprise value of $13 billion, including net debt of approximately $1.6 billion. Under the agreement, XM shareholders will receive a fixed exchange ratio of 4.6 shares of SIRIUS common stock for each share of XM they own. The transaction, which is subject to shareholder and regulatory approvals, is expected to close by the end of 2007, pending regulatory approval.

The developing outlook reflects Moody's view that over the intermediate term, these potential revenue and cost synergies could impact the combined company's free cash flow and other credit metrics and provide upward momentum to its rating. However, the impact on the credit metrics is dependent on the size and timing of these synergies as well as costs associated with realizing these synergies including those related to making the two companies' technological
architectures inter-operable. Given the uncertain nature of the impact of the cost synergies and enhanced operating leverage on the credit metrics including free cash flow, and the regulatory challenges to completing the merger, Moody's maintains XM's Caa1 corporate family rating at this time.

Moody's Changes Sirius' Outlook To Developing From Stable

New York, February 21, 2007 -- Moody's Investors Service affirmed the existing debt ratings of SIRIUS Satellite Radio, Inc. ("SIRIUS") and changed the outlook to developing from stable in connection with the company's February 19, 2007 announcement that SIRIUS and XM Satellite Radio Holdings, Inc. ("XM") have entered into a definitive merger agreement. The proposed transaction will combine the two companies in a tax-free, all-stock merger of equals with a
combined enterprise value of $13 billion, including net debt of approximately $1.6 billion. Under the agreement, XM shareholders will receive a fixed exchange ratio of 4.6 shares of SIRIUS common stock for each share of XM they own. The transaction, which is subject to shareholder and regulatory approvals, is expected to close by the end of 2007, pending regulatory approval.

The developing outlook reflects Moody's view that over the intermediate term, these potential revenue and cost synergies could impact the combined company's free cash flow and other credit metrics and provide upward momentum to its rating. However, the impact on the credit metrics is dependent on the size and timing of these synergies as well as costs associated with realizing these synergies including those related to making the two companies' technological
architectures inter-operable. Given the uncertain nature of the impact of the cost synergies and enhanced operating leverage on the credit metrics including free cash flow, and the regulatory challenges to completing the merger, Moody's maintains Sirius' Caa1 corporate family rating at this time.

Labels: moodys, sirius, xm