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Sirius XM Still ‘Challenged’

It got ugly for Sirius XM last week, with the stock falling to 36 cents a share, then climbing back this week to … 48 cents. But analysts said don’t write off the company yet.

David Bank of RBC Capital Markets said Sirius XM is in a “challenging” debt situation. “There are certainly concerns about Sirius’ ability to refinance its debt … it’s really difficult to predict where the capital markets will be and this environment is not a very forgiving one. It’s not giving anyone the benefit of the doubt.” But, he added, “I don’t think they should be concerned about the viability of the business itself.”

As you may know, Sirius XM must refinance $1.1 billion in debt — a significant portion of its balance sheet — by next December. 

CEO Mel Karmazin still believes his company will hit its forecasts and generate $300 million, even if only 12 million cars sell this year, as he reportedly stated yesterday at the DowJones/Nielsen Media & Money conference in New York.

At retail, it appears Sirius XM is putting more promotional emphasis on its new Best of Both service, which costs subscribers $16.99/month, than the new a la carte service at $6.99/month — probably a wise move. More than one retail buyer said he had trouble getting information on the a la carte service even though it’s been available since Oct. 2 and even though they are ordering the radios.

When I quizzed a Sirius phone rep at the toll-free activation center about the a la carte plan, he said he was not supposed to mention it, but if I’ve purchased an a la carte radio, he can help me activate it. Hmmm.

But it’s mainly the debt — due in three parts, in February, May and December of 2009 — that is driving down the stock price.

April Horace of Janco Partners is slightly less concerned than Bank. Karmazin “is working feverishly on getting the refinancing done and he will obviously do it at an opportunistic time, so maybe he needs to wait to get a better conversion rate on the notes. But his back is not up against the wall,” she said.

Still, a good third quarter would help that financing, she added.

So far, Audiovox, XM’s distributor, told analysts last week that it had seen “an uptick” in satellite-radio sales since the merger was completed. Let’s hope it continues.