XM Is Seeking $120 Million In Financing

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By Alejandro Lazo
Washington Post Staff Writer
Monday, May 26, 2008

XM Satellite Radio Holdings warned in a regulatory filing last week that its financial position may be threatened if it cannot find $120 million worth of financing to adhere to the terms of its high-profile contract with Major League Baseball.

The District satellite radio company is required to set aside $120 million in an escrow account as part of its eight-year contract with baseball, giving it the right to air news, scores, highlights and live game coverage.

In July 2006, XM secured a two-year surety bond to cover that obligation. That bond is set to expire June 30, and XM is seeking another source of financing to cover its obligation to baseball, the company said in a filing with the Securities and Exchange Commission.

On May 15, the company created a new escrow account, using $57.5 million in cash and borrowing $62.5 million it has available from a credit line. But that arrangement reduces the satellite company's liquidity and "could have an adverse effect on our financial position" if it is not replaced with a "letter of credit, surety bond or other similar arrangement," XM said in the filing.

XM declined to comment further but indicated in the filing that it is negotiating with baseball over the terms of its arrangement.

"We are continuing to have discussions with MLB about this escrow and related matters, and there may be further developments," the company said in the filing.

A baseball spokesman declined comment.

"We do not share details of conversations that we have with our partners," MLB spokesman Matt Bourne said.

The deal with baseball was one of several headline-grabbing programming agreements that both XM and Sirius Satellite Radio of New York, the nation's other satellite radio company, entered into with the intent of drumming up interest in the new format and winning subscribers. While XM snagged Major League Baseball and Oprah, Sirius signed the National Football League and radio personality Howard Stern.

Under its deal with baseball, XM agreed to pay the league $60 million a year for programming beginning in spring 2005, as well as keep the $120 million in escrow. The contract with baseball is good through 2012 and can be extended for three years.

XM Radio's search for financing comes in the midst of a tight credit environment as well as its efforts to merge with Sirius. The Justice Department cleared the marriage in March, and the deal awaits final regulatory approval by the Federal Communications Commission. After a long-delayed review of the merger, which was announced in February 2007, FCC Chairman Kevin J. Martin said the commission may reach an agreement by the end of June.

Under their merger agreement, XM and Sirius are restricted in their ability to incur additional debt financing beyond existing credit lines and are limited in the amount of new equity they can issue without first getting each other's approval.

In its filing last week, XM indicated that it also expects to reach a 90-day agreement with its lenders to allow it to reduce the minimum amount of cash it needs to keep on hand, lowering the threshold to $50 million from $75 million.


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