S&P ups Sirius, gives loan B

Standard & Poor's said it raised its corporate credit rating on Sirius Satellite Radio Inc. to CCC+ from CCC.

The agency said that the upgrade is based on the company's improved operating metrics since the time of the original rating and its momentum in gaining market share from its competitor, XM Satellite Radio Holdings Inc. (CCC+/Watch positive).

All ratings remain on CreditWatch with positive implications, where they were placed on Feb. 20, following the company's definitive agreement to an all-stock "merger of equals" with XM, the agency noted.

At the same time, S&P said it assigned its B bank loan rating and recovery rating of 1 to the company's proposed $250 million senior secured credit facility, indicating the expectation for very high recovery in the event of a payment default.

The facility consists of a $250 million term loan B due 2012 and is the company's only secured debt issuance, representing less than 20% of Sirius' pro forma capitalization, the agency said, adding that the facility's small size and its claim on key assets significantly increase recovery prospects for the loan.

According to the agency, the very low speculative-grade rating on Sirius reflects the company's substantial debt load, its continuing EBITDA losses and cash flow deficits, intermediate-term liquidity concerns if Sirius doesn't reach free cash flow breakeven as soon as expected or if it has difficulty accessing capital markets, a slowdown in net subscriber growth and uncertainty surrounding the potential merger with XM and the overall long-term demand for pay-radio services.

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