Sirius XM Radio (NASDAQ:SIRI) has come a long way from 18 months ago when it was facing bankruptcy. Over the last two years, the company has gone through drastic shifts in management including a hunt for a new CEO after Mel Karmazin left.
The company is planning another huge move as it intends to repurchase as much as $2 billion in company stock over the next year. Additionally, in 2014, it may repurchase as much as $2.5 billion. A move like this would mean a dramatic restructuring of the company, and it may drive up the long-term stock price.
Additionally, the company even has some cash to spend on itself after at least a decade of red ink. However, the company will need even more cash if it wants to achieve its current plans.
Cash is not the only thing standing in the company’s way though. So far, it has the permission of lenders and enough liquidity to buyback the stock it wants. However, the company needs to get permission to do so from its current bondholders.
Previous financial difficulties resulted in Sirius agreeing to restrictions on how it could use its money. It is probable that Sirius will try to renegotiate its covenants in one of two ways. It may try to either refinance the bonds or get a waiver from the bondholders.
Sirius’ plan is very similar to that of other large companies in recent years as corporations realize that financial difficulties could occur at almost any time. It also helps that buying back its own stock is one of the least expensive options a company has.
Sirius has come a long way in a short time, and it looks like the company has ideas for the future as well. It is worth seeing what the company does in the coming years, as it looks like it will continue to invest in itself.
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