New York - Sirius Satellite Radio has agreed with holders of about $1.2 billion of its debt and preferred stock, to convert substantially all of its approximate $700 million of debt and all of its $525 million of preferred stock into common stock.
The company expects to raise $200 million from the sale of the newly issued common stock. The additional $200 million, combined with $240 million in cash on hand, is expected to give Sirius sufficient cash to operate into the second quarter of 2004, based upon its current business plan. However, Sirius added that its subscription acquisition rate has slowed recently due to the general downturn at retail.
Sirius CEO and president Joseph Clayton told analysts in a conference call yesterday that the company lowered its subscription projections for the year down to 30 to 40,000. In August, Clayton predicted subscriptions would reach 75,000 down from his forecast in January of 100,000 to 150,000 subscriptions for the year. Clayton blamed the slow sales on the lack of Sirius `plug `n' play' models, which work with any car radio brand. He estimated that these units account for 30 to 35 percent of satellite radio sales.
On an upbeat note, Clayton announced that Sirius reached an agreement with its key partners to convert more that $1.2 billion in debt and preferred stock. In addition, Sirius raised $200 million from the sale of newly issued stock. Sirius' partners Oppenheimer, Apollo Management and The Blackstone Group converted $700 million in debt and $525 million in preferred stock to common stock.
Based on the new capitalization, Clayton said Sirius would be able to reach the break-even point with a little over two million subscribers by 2005.
'This agreement is a crucial step in our efforts to strengthen the financial status of Sirius,' said Clayton, adding, 'I'm proud of what we've accomplished in less than a year.' He noted the recapitalization was a particular achievement in this economy and said that the company could now focus 100 percent of its attention on its subscription acquisition and programming.
Clayton continued, 'Our subscriptions, currently at 14,000 are being slowed by a variety of factors including a sluggish marketplace and the lack of a plug `n' play unit.' He also cited 'a lower than anticipated roll out of our brands. Panasonic just started shipping two weeks ago. And our sales have been negatively impacted by reports in the press.'
Clayton expects subscriptions to reach 400,000 next year as plug `n' play models ship in quantity.