Our business and our financial condition is being affected by general economic conditions. for Sirius_XM

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Sirius XM Radio (SIRI)

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SIRI » Topics » Our business and our financial condition is being affected by general economic conditions.

These excerpts taken from the SIRI 10-K filed Mar 10, 2009.

Our business and our financial condition is being affected by general economic conditions.

We believe that our business and our financial condition is being adversely affected by general economic conditions in a variety of ways. For example:

•

As a result of the conditions in the capital markets, we may not be able to access funding. An inability to access replacement or additional sources of liquidity to fund our cash needs or to refinance or otherwise fund the repayment of our maturing debt, could adversely affect our growth, our financial condition, our results of operations, and our ability to make payments on our debt, and could force us to seek the protection of the bankruptcy laws.

•

Tightening credit policies could adversely affect our liquidity by making it more difficult or costly for our customers to access credit, and may result in changes to our payment arrangements by credit card companies and other credit providers.

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The purchase of a satellite radio subscription is discretionary. The weakening economy affected our net subscriber additions in 2008 and will likely affect the growth of our business and results of operations in 2009.

•

The sale and lease of vehicles with satellite radios is an important source of subscribers for us. The dramatic slowdown in auto sales negatively impacted our subscriber growth in 2008 and will likely significantly impact subscriber growth in 2009. A bankruptcy filing by one or more of the major automakers could also seriously affect our business.

Our business and our financial condition is being affected by general economic conditions.

STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%">We believe that our business and our financial condition is being adversely affected by general economic conditions in a variety of ways. For example:

•

As a result of the conditions in the capital markets, we may not be able to access funding. An inability to access replacement or additional sources of liquidity to
fund our cash needs or to refinance or otherwise fund the repayment of our maturing debt, could adversely affect our growth, our financial condition, our results of operations, and our ability to make payments on our debt, and could force us to seek
the protection of the bankruptcy laws.

•

Tightening credit policies could adversely affect our liquidity by making it more difficult or costly for our customers to access credit, and may result in changes
to our payment arrangements by credit card companies and other credit providers.

•

The purchase of a satellite radio subscription is discretionary. The weakening economy affected our net subscriber additions in 2008 and will likely affect the
growth of our business and results of operations in 2009.

•

The sale and lease of vehicles with satellite radios is an important source of subscribers for us. The dramatic slowdown in auto sales negatively impacted our
subscriber growth in 2008 and will likely significantly impact subscriber growth in 2009. A bankruptcy filing by one or more of the major automakers could also seriously affect our business.

STYLE="margin-top:18px;margin-bottom:0px">We need to refinance portions of our debt in the next two years, which refinancing may not be available.

STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%">We have approximately $537 million of debt maturing in 2009 and 2010, including;

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at SIRIUS, $1.744 million of 8³/SIZE="1">4% Convertible Subordinated Notes that mature on September 29, 2009;

•

at XM Holdings, approximately $227.5 million of 10% Convertible Senior Notes that mature on December 1, 2009;

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at XM Holdings and XM (as co-obligors), $33.2 million of 10% Senior Secured Discount Convertible Notes that mature on December 31, 2009; and

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at XM, a $350 million credit facility, which is fully drawn and $100 million of which is due in 2009, $175 million is due by May 5, 2010 and $75 million is due
in May 2011.

As a result of the May 2010 maturities, our existing cash balances and our cash flows from operating
activities may not be sufficient to fund our projected cash needs at that time. We may not be able to access additional sources of refinancing on similar terms or pricing as those that are currently in place, or at all, or otherwise obtain other
sources of funding. An inability to access replacement or additional sources of liquidity to fund our cash needs or to refinance or otherwise fund the repayment of our maturing debt could adversely affect our growth, our financial condition, our
results of operations, and our ability to make payments on our debt, and could force us to seek the protection of the bankruptcy laws. It will be more difficult to obtain additional financing if prevailing instability in the credit and financial
markets continues.

SIRIUS is the sole stockholder of XM Holdings and its subsidiaries and its business is operated as an unrestricted
subsidiary under the agreements governing SIRIUS’ indebtedness. Under certain circumstances, SIRIUS may be unwilling or unable to contribute or loan XM capital to support its operations. Similarly, XM may be unwilling or unable to contribute or
loan SIRIUS capital to support its operations. To the extent XM’s funds are insufficient to support its business, XM may be required to seek additional financing, which may not be available on favorable terms, or at all. If XM is unable to
secure additional financing, we could be forced to seek the protection of the bankruptcy laws.

Our operations will also be affected by the FCC order approving the Merger. In addition, our future
liquidity may be adversely affected by, among other things, changes in our operations or business plans, or by the nature and extent of the benefits, if any, achieved by operating XM as a wholly-owned subsidiary.

STYLE="margin-top:18px;margin-bottom:0px">Our substantial indebtedness is adversely affecting us.

SIZE="2">As of December 31, 2008, we had an aggregate principal amount of approximately $3.3 billion of indebtedness.

Our substantial
indebtedness has important consequences. For example, it:

•

limits our ability to borrow additional funds;

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limits our flexibility in planning for, or reacting to, changes in our business and the audio entertainment industry;

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increases our vulnerability to general adverse economic and industry conditions;

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requires us to dedicate a substantial portion of our cash flow from operations to payments on indebtedness, reducing the availability of cash flow to fund working
capital, capital expenditures and other general corporate activities; and

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places us at a competitive disadvantage compared to competitors that have less debt.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">Interest costs related to our debt are substantial and, as a result, the demands on our cash resources are significant.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">Our indebtedness contains covenants that, among other things, restrict our ability to incur more debt, pay dividends and make distributions, make certain
investments, repurchase stock, create liens, enter into transactions with affiliates, enter into sale lease-back transactions, merge or consolidate, and transfer or sell assets. Failure to comply with the covenants contained in the indentures and
agreements governing this debt could result in an event of default, which, if not cured or waived, could cause us to seek the protection of the bankruptcy laws, discontinue operations or seek a purchaser for our business or assets.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">XM is required to maintain a minimum cash balance of $75 million under its credit facilities, and SIRIUS is required to maintain a minimum cash
balance of $35 million under those credit facilities. If XM’s or SIRIUS’ cash balance falls below these amounts, the companies would need to obtain a waiver from the lenders to avoid a default. No assurance can be given that XM and
SIRIUS would be able to obtain such a waiver or otherwise avoid a default under its credit facilities.

EXCERPTS ON THIS PAGE:

10-K (2 sections)	Mar 10, 2009

Sirius XM Radio (SIRI)

SIRI » Topics » Our business and our financial condition is being affected by general economic conditions.

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