Even with only half of its bondholders participating, SiriusXM has fully retired its $1 billion in 3.125% Senior Notes due 2026, completing a two-step refinancing that eliminates a major near-term maturity and extends the company’s debt obligations for six years.
The company offered to buy the bonds back early, funded by a new issuance of 5.875% Senior Notes not due until 2032. When the offer closed on March 5, only $498.9 million of the $1 billion had been tendered. The remaining $501.1 million in holders declined, but the audio giant was prepared.
The original offer documents preserved the right to deposit funds with a third-party trustee to guarantee repayment of any notes not tendered. On March 10, the company deposited sufficient U.S. Treasuries with US Bank Trust Company to cover the remaining $501.1 million in principal plus accrued interest through the September maturity date.
The notes are now legally discharged.
Of course, in doing so, the maneuver carries a cost. The deposited funds earn approximately 4.2% in Treasuries while SiriusXM pays 5.875% on the new notes used to finance them; a spread of roughly 170 basis points on $501 million for the six months until September maturity. The gap is a direct consequence of the low tender participation, and one the company would have avoided had all bondholders taken the deal.
