Sirius XM’s Bonds Slump After Liberty Media Proposes Split-Off
Sirius XM Holdings Inc.’s bonds tumbled after Liberty Media Corp. proposed a split-off of its stake in the satellite radio company.
The split-off would involve Liberty Media exchanging its shares of Sirius XM for a combination of cash and Liberty Media’s tracking stock, Liberty SiriusXM Group. Liberty Media owns about 70% of Sirius XM, and the split-off would reduce its stake to about 40%.
Background of Liberty Media and Sirius XM
Liberty Media is a media and entertainment company that owns a variety of businesses, including the Atlanta Braves baseball team, the Formula One auto racing series, and the Sirius XM satellite radio service. Liberty Media acquired its stake in Sirius XM in 2009, when it invested $530 million in the company.
Sirius XM is a satellite radio service that provides commercial-free music, sports, news, and entertainment programming to subscribers in the United States and Canada. It has more than 33 million subscribers and is the largest satellite radio provider in North America.
Liberty Media’s Proposal
Liberty Media proposed the split-off in order to unlock the value of its stake in Sirius XM. The split-off would involve Liberty Media exchanging its shares of Sirius XM for a combination of cash and Liberty Media’s tracking stock, Liberty SiriusXM Group. Liberty Media would receive $3 billion in cash and the tracking stock, which would represent a 40% stake in Sirius XM.
The proposal has been met with skepticism from investors, who are concerned that the split-off could lead to a dilution of Sirius XM’s stock. The proposal also raises questions about the future of Sirius XM, as Liberty Media’s stake in the company would be reduced from 70% to 40%.
Impact on Sirius XM’s Bonds
The proposal has had a negative impact on Sirius XM’s bonds. The company’s bonds have tumbled since the proposal was announced, with the yield on its 5.875% bonds due in 2027 rising to 6.5%. The yield on its 6.25% bonds due in 2029 has also risen to 6.9%.
The bond market is concerned that the split-off could lead to a dilution of Sirius XM’s stock, which could have a negative impact on the company’s ability to service its debt. The bond market is also concerned that the split-off could lead to a change in Sirius XM’s management, as Liberty Media’s stake in the company would be reduced.
Reaction from Analysts
Analysts have been divided in their reaction to the proposal. Some analysts believe that the split-off could be beneficial for Sirius XM, as it would unlock the value of Liberty Media’s stake in the company. Other analysts are more skeptical, arguing that the split-off could lead to a dilution of Sirius XM’s stock and a change in its management.
Potential Outcomes
The proposal is still in the early stages and it is unclear if it will be approved. If it is approved, it could lead to a dilution of Sirius XM’s stock and a change in its management. It could also lead to a reduction in the company’s debt burden, as Liberty Media would receive $3 billion in cash as part of the split-off.
The proposal could also have a positive impact on Sirius XM’s stock, as it would unlock the value of Liberty Media’s stake in the company. It could also lead to a more focused management team, as Liberty Media’s stake in the company would be reduced.
Conclusion
Sirius XM’s bonds have tumbled since Liberty Media proposed a split-off of its stake in the satellite radio company. The proposal has been met with skepticism from investors, who are concerned that the split-off could lead to a dilution of Sirius XM’s stock and a change in its management. Analysts are divided in their reaction to the proposal, with some believing that it could be beneficial for Sirius XM and others arguing that it could have a negative impact. The proposal is still in the early stages and it is unclear if it will be approved. If it is approved, it could lead to a dilution of Sirius XM’s stock and a change in its management, but it could also have a positive impact on the company’s stock.