XM Gets $250 Million in Cash

XM Satellite Radio executives can breath a sigh of relief this holiday. The satcaster was able to reach new financing agreements with its largest creditors, for a total of $450 million. The deals consist of $200 million in new funds from strategic and financial investors and $250 million in payment deferrals and related credit facilities from General Motors. XM expects the deal to close by the end of February.
“With this financing package, we believe we have achieved full funding through cash flow breakeven,” said Hugh Panero, XM’s President and CEO. “The financing also removes a major roadblock to our company being valued based on its marketplace progress, business plan execution and future economic potential.”
The $200 million in new funding is in the form of 10% Senior Secured Discount Convertible Notes due in 2009 and a small concurrent common stock sale. Purchasers of the Notes include American Honda Motor Co., Inc., Hughes Electronics Corporation, The Hearst Corporation, Columbia Capital LLC, AEA Investors Inc., Eastbourne Capital Management LLC, BayStar Capital II, L.P., and other parties. The notes are convertible into common stock at a price of $3.18 per share.
In the other major element of the financing package, General Motors has agreed to defer or finance up to $250 million of payments through 2006.
In addition to the financing package, XM will commence an Exchange Offer on Tuesday, Dec. 24, for all $325 million of its outstanding 14% Senior Secured Notes due 2010 in exchange for new 14% Senior Secured Discount Notes due 2009, warrants and cash.
Based on sales-to-date and projections through yearend, XM expects to have more than 350,000 radios (both retail and OEM) sold and ready for activation by Dec. 31. The actual yearend activated subscriber total (sales which have resulted in activations) is expected to be between 340,000-350,000.