8-KMaterial AgreementsFinancial EventsOther Events+1

Liberty Media Corp 8-K Report, Material Agreement (Jul 10, 2017)

Filed July 10, 2017For Securities:FWONKFWONAFWONB

Summary

This 8-K filing from Liberty Media Corporation details a significant debt issuance by its subsidiary, Sirius XM Radio Inc. (SiriusXM). SiriusXM successfully raised $2.0 billion by issuing two tranches of senior notes: $750 million of 3.875% Senior Notes due 2022 and $1.250 billion of 5.000% Senior Notes due 2027. These notes were sold to institutional buyers and will be used to redeem existing, higher-cost debt, specifically the 4.25% Senior Notes due 2020 and 5.75% Senior Notes due 2021, as well as to repay a portion of its revolving credit facility borrowings. This transaction represents a strategic refinancing effort by SiriusXM to lower its overall interest expense and extend its debt maturity profile. The issuance includes guarantees from several wholly-owned subsidiaries of SiriusXM, which rank equally with existing senior indebtedness. The new notes are unsecured and rank junior to any secured debt but senior to subordinated debt. The filing also outlines change of control provisions and restrictive covenants designed to protect noteholders.

Key Highlights

  • 1SiriusXM issued $750 million in 3.875% Senior Notes due 2022 and $1.250 billion in 5.000% Senior Notes due 2027, raising a total of $2.0 billion.
  • 2The proceeds will be used to redeem all outstanding 4.25% Senior Notes due 2020 ($500 million) and 5.75% Senior Notes due 2021 ($600 million).
  • 3The refinancing is expected to lower SiriusXM's overall interest expense and extend its debt maturity profile.
  • 4The new notes are senior unsecured obligations of SiriusXM, guaranteed by certain wholly-owned subsidiaries.
  • 5The notes are structurally subordinated to liabilities of non-guarantor subsidiaries and effectively subordinated to secured debt.
  • 6The issuance includes standard covenants such as change of control provisions and restrictions on liens and sale/leaseback transactions.
  • 7The repayment of existing notes involved redemption premiums and specific payment dates in late July and early August 2017.

Frequently Asked Questions

The primary purpose of this debt issuance by SiriusXM is to refinance existing, higher-interest-rate debt. Specifically, SiriusXM is using the proceeds to redeem its 4.25% Senior Notes due 2020 and 5.75% Senior Notes due 2021, and to reduce borrowings under its senior secured revolving credit facility.

SiriusXM is redeeming $500 million of its 2020 Notes and $600 million of its 2021 Notes, totaling $1.1 billion in principal amount of existing notes. By issuing new notes with lower coupon rates (3.875% and 5.000%) compared to the redeemed notes (4.25% and 5.75%), SiriusXM expects to lower its overall interest expense and improve its financial efficiency.

The new 2022 and 2027 Notes are general unsecured senior obligations of SiriusXM. They rank equally with SiriusXM's other senior indebtedness and senior to any subordinated debt. However, they are structurally subordinated to the liabilities of SiriusXM's non-guarantor subsidiaries and effectively subordinated to any secured debt to the extent of the collateral value.

Yes, the notes are subject to restrictive covenants that include requiring SiriusXM to make an offer to repurchase the notes at 101% of their principal amount in the event of a change of control combined with a credit rating downgrade. Additionally, covenants restrict SiriusXM's ability to create certain liens, enter into sale/leaseback transactions, and merge or consolidate.