XM Satellite closes some exchange agreements for 10% convertibles, 8.25% preferreds

By Laura Lutz

Des Moines, Oct. 27 - XM Satellite Radio Holdings Inc. settled its Sept. 22 agreements with American Honda Motor Co. and director George Haywood by issuing 23.5 million shares in exchange for $42.6 million in principal amount of its 10% senior secured discount convertible notes due 2009 and 50,000 shares of the XM's 8.25% series C convertible redeemable preferred stock, according to an 8-K filing with the Securities and Exchange Commission.

The company has previously closed similar arrangements with Bear Stearns, Royal Bank of Canada and Eastbourne Capital. It still intends to settle a similar agreement with another holder of its 8.25% preferreds.

The company is also conducting a tender offer to encourage holders to convert the $57.4 million principal amount of 10% senior secured discount convertible notes due 2009 that remain outstanding.

Under the tender, which was announced on Sept. 26, the company is offering $320.80 in shares of class A common stock as an incentive for each $1,000 of the notes tendered for conversion, in addition to the regular amount of stock that would be issued.

The tender offer, originally set to expire on Oct. 19, was earlier extended to Nov. 10. As of midnight ET on Oct. 19, the company said holders of $22.6 million of its $99.9 million of convertibles had tendered for conversion.

Under the tender, the company is offering $320.80 in shares of class A common stock as an incentive for each $1,000 of the notes tendered for conversion, in addition to the regular amount of stock that would be issued.

Due to the extension, pricing for the tender offer will be based on the average closing price of the company's class A common stock for the five-day period ending on Nov. 8.

Based on the stock's Sept. 21 closing price, the company estimated that it would issue about 19.4 million shares if the entire amount of notes were converted.

Under their original terms, the notes, issued in January 2003, are convertible into class A stock at $3.18 per share.

Between the tender offer and the exchange agreements, the company said it expects to retire as much as $100 million in principal amount at maturity of the notes and all of the series C preferred stock.

Washington, D.C.-based XM Satellite Radio is a provider of satellite-delivered entertainment and data content.

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