News

In August, the future looked cloudy for Sirius Satellite Radio, Inc. Despite the eventual commercial promise of satellite radio, the startup suffered from massive debt accrued during its development and from a slow initial subscription rate. Company officials had discussed a possible bankruptcy filing if additional financing couldn't be found.

The clouds parted for the company on Thursday, October 17, with a stock move that raised approximately $200 million in cash–enough to keep it operating through the second quarter of 2004.

A "recapitalization" agreement orchestrated by Sirius backers Oppenheimer Global Funds, Apollo Management LP, and Blackstone Group LP converted most Sirius debt (variously reported at $700 million to $1.2 billion) and preferred stock into common stock, raising enough new cash to sustain the company for the next 18 months. The deal gives creditors 62% ownership of the company. Sirius CEO Joseph Clayton said the new financing would reduce the company's cash needs until 2005 to $75 million from a projected $600 million, giving Sirius "the solid balance sheet [required] to execute our business plan."

While trying to build its customer base, Sirius was consuming approximately $120 million per quarter, including $20 million in interest payments, but so far has signed only about 14,000 subscribers, more than twice the number it reported two months ago. News of the deal boosted Sirius stock, which rose 57% to $1.32/share on the Nasdaq, still far below a 52-week high of $13.05/share.

Clayton said that Sirius expects to acquire 400,000 subscribers within the next year, as new "plug-and-play" satellite receivers come on the market. Competitor XM Satellite Radio reported 202,000 subscribers as of September 30.