S&P rates XM Satellite notes B

Standard & Poor's said it assigned XM Satellite Radio Inc.'s $350 million senior secured notes due 2013 its issue-level rating of B, two notches higher than the CCC+ corporate credit rating on parent company Sirius XM Radio Inc.

The agency said it also assigned the notes a recovery rating of 1.

S&P added that the company plans to use proceeds to refinance XM Satellite Radio's existing first-lien credit facility, which has heavy amortization requirements over the next two years.

At the same time, the agency said it affirmed its outstanding ratings on Sirius XM Radio Inc. and its XM Satellite Radio Holdings Inc. unit, which it analyzes on a consolidated basis.

"The CCC+ rating on New York City-based Sirius XM reflects the company's substantial debt load, historically large EBITDA losses, and discretionary cash flow deficits," said S&P credit analyst Hal Diamond.

"The operating synergies and cost-saving opportunities arising from the July 2008 acquisition of XM Satellite Radio Holdings Inc., Sirius XM's only direct competitor, are modest positives that do not offset these risks. Sirius' $5.7 billion stock purchase of XM more than doubled the company's subscriber base and eliminated the intense competition for subscribers and overbidding for programming and distribution contracts that had impeded profitability."

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