You've Come a Long Way, Sirius XM

Sirius XM Radio raised some serious money this week, and it's a testament to how far the satellite radio provider has come since completing the merger between Sirius and XM five summers ago.

Monday marked the fifth anniversary of the merger being finalized after a drawn-out battle with regulators. There wasn't a lot of fanfare commemorating the event, but it's worth a moment of reflection.

Sirius XM watched more than 18.5 million subscribers at the time, generating annualized revenue of $2.4 billion. It surpassed 25 million subscribers last month, and it's on pace to top $3.7 billion in revenue for all of 2013.

The more dramatic improvements have come on the way down the bottom line. Sirius XM was losing money then. It's consistently profitable now.

At the time of the merger, Sirius XM was targeting $300 million in adjusted EBITDA by 2009 once the realized synergies started kicking in. The goal for this year is $1.14 billion. Sirius XM was merely aiming to become free-cash-flow positive in 2009. This year, it's on pace to generate $915 million in free cash flow.

Then we get to Sirius XM's clout, and that's where Monday's financing move is so telling.

The company raised $600 million by issuing senior notes that come due in 2021. It will be paying a reasonable rate of 5.75%, and it's using the proceeds to retire debt that comes due in two years that was issued at a higher 8.75% rate.

Then again, even 8.75% would've been a bargain when it really needed the money four years ago. Despite successfully completing the merger that created a monopoly in satellite radio, Sirius XM was on the brink of bankruptcy, with its shares trading as low as $0.05 a share.

That's when Liberty Media stepped in. It shelled out the money that Sirius XM needed to meet its near-term obligations, but it did so at a steep 15% interest rate. More importantly, it had to dilute existing stakeholders by handing over a 40% preferred share stake to Liberty Media at the time. 

The shares have held up well under Liberty Media's watch, but do you realize that Sirius XM would be worth 60% more today if it were to command the same market cap without Liberty Media's involvement? Sure, the counterargument would be that Sirius XM wouldn't be around if Liberty Media weren't there to save the day, but things would've played out far differently if Sirius XM had been able to raise financing without giving a chunk of the company away in the process.

We can't go back, and in this case, that's a good thing. The media giant has never been in better shape. One can only imagine where Sirius XM will be in another five years.

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