Sirius XM Radio Inc.'s Proposed $750 Million Senior Unsecured Notes Due 2024 Rated 'BB' (Recovery Rating: '3')

NEW YORK (S&P Global Ratings) June 18, 2019--S&P Global Ratings today assigned its 'BB' issue-level rating and '3' recovery rating to New York-based satellite radio operator Sirius XM Radio Inc.'s proposed $750 million senior unsecured notes due 2024. The '3' recovery rating indicates our expectation for meaningful (50%-70%; rounded estimate: 50%) recovery for lenders in the event of a payment default. Sirius XM plans to use the proceeds from the proposed notes to repay a portion of its outstanding $1.5 billion 6% senior unsecured notes due 2024. Our 'BB' issuer credit rating and stable outlook on Sirius XM remain unchanged because the proposed transaction will not affect its net leverage. We continue to expect the company's net leverage to remain

...Simulated default assumptions - Our simulated default scenario contemplates a default occurring in 2024 due to a combination of the following factors: sharply lower auto sales or the nonrenewal of distribution agreements with automakers; elevated subscriber churn; increased competition from free or alternative media distribution channels; and the nonrenewal of key programming contracts upon expiration. - Other default assumptions include an 85% draw on the revolving credit facility, LIBOR is 2.5%, the spread on the revolving credit facility rises to 5% as covenant amendments are obtained, and all debt includes six months of prepetition interest. - We value Sirius XM on a going-concern basis using a 6.5x multiple of our projected emergence EBITDA. This multiple is 0.5x higher than the multiples we use for other radio broadcasters that we rate because of Sirius XM's large size and high percentage of recurring subscription revenue. Simplified waterfall - EBITDA at emergence: $910 million -...

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