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Sirius XM: Another Analyst Discontinues Coverage

Sirius XM investors just got more bad news. On Jan. 28, Barclay Capital analyst James Ratcliffe announced that he is discontinuing coverage of the satellite radio service provider, ??s we believe that the equity price is not being driven by fundamentals or the future of the underlying business, but rather purely by speculation as to the company?? ability to refinance or restructure upcoming debt maturities.?/p>

Ratcliffe, whom I’ve spoken with many times and who is one of the smartest and most thorough analysts I know, argues that forecasting Sirius’s future is akin to reading tea leaves: Everything hinges on the company’s ability to refinance nearly $1 billion in debt due this year, with the first portion due on Feb. 15. While CEO Mel Karmazin has repeatedly said he is confident he’ll be able to refinance the debt, he’s yet to close a large deal — a tough proposition in this economy and with the current state of the credit markets.

Ratcliffe’s note is all the more concerning considering that Lehman Brothers, where he used to be vice president of equity research until September, was an underwriter for Sirius XM in a 2001 share issue. What’s more, Ratcliffe is not the only analyst to discontinue coverage: Goldman Sachs stopped covering the satellite radio service provider last year. Some 12 analysts still cover the company. But today’s announcement seems to indicate further erosion of the financial community’s confidence in the company’s prospects.

That said, there are a few bright spots worth mentioning: Sirius, whose shares are trading around 11 cents, can't get delisted from the Nasdaq until November. Sirius also recently announced it will raise some of its rates in March. As irksome as this step may be to affected subscribers, it could have positive cash implications for the company.

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