XM Arranges New Round Of Financing; Expects To Break Even In 2004 - XM Satellite Radio Holdings Inc - Brief Article

Autoparts Report, Jan 3, 2003

XM Satellite Radio Holdings Inc. said it has lined up $450 million in new funding to carry it through the middle of 2004, by which time the startup satellite radio provider hopes to reach a break-even point on a cash-flow basis, the Wall Street Journal reported. XM Satellite is one of two major services delivering digital-quality music and other programs via satellite to subscribers who buy special equipment.

But capital has been scarce for XM and rival Sirius Satellite Radio Inc. as they try to launch services that have been billed as the equivalent of cable television for radio. Sirius this fall arranged a $1.2 billion funding package that allowed it to avoid defaulting on some debts. Now, XM says its new funding, which comes in two pieces, will carry it through the next phase of its effort to launch its service.

The company will receive $200 million in new funding from investors and $250 million in the form of payment deferrals and credit facilities from General Motors Corp., a major XM investor.

The $200 million comes from XM's issuance of 10 percent senior secured discount convertible notes due in 2009 and a small common-stock sale. XM said the purchasers included American Honda Motor Co., Hearst Corp. and others. The notes can be converted into common stock at $3.18 a share.

XM is nearing 350,000 subscribers, and hopes by the end of 2003 to have 1.2 million subscribers. Most of the cash from the new funding agreements will be used to pay for sales and marketing efforts to attract new customers.