XM Satellite to sell $550 million six-year exchangeables tied to Sirius; talked at 6%-6.5%, up 20%-30%

By Rebecca Melvin

New York, July 28 - XM Satellite Radio Inc., a subsidiary of XM Satellite Radio Holdings Inc., planned to price $550 million of six-year exchangeable senior subordinated notes - exchangeable into shares of Sirius Satellite Radio Inc. common stock - after the close Monday, according to a syndicate source.

Price talk on the exchangeables is for a coupon of 6% to 6.5% and an initial conversion premium of 20% to 30%.

The Rule 144A offering is being sold via joint bookrunners Morgan Stanley & Co. Inc., J.P. Morgan Securities Inc. and UBS.

The deal is part of a series of transactions to refinance some XM debt in connection with its pending merger with Sirius, and it is conditioned on closing of the merger, which remains subject to Federal Communications Commission approval.

Concurrently with the notes offering, Sirius will enter into share lending agreements with share borrowers. Share borrowers will sell the borrowed shares in a separate public offering.

Sale of the borrowed shares is intended to facilitate privately negotiated derivative transactions by which investors in the notes will hedge their investment in the notes.

The share borrowers will be required to return the borrowed shares following the maturity of the notes or their earlier retirement. The share borrowers will receive all of the proceeds from the sale of the borrowed shares.

XM is a satellite radio services company located in Washington, D.C.

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