RadioBanter - XM Radio story

By Anitha Reddy, Washington Post Staff Writer

XM Satellite Radio Holdings Inc. completed a secondary stock offering
yesterday to pay for a spare satellite in case it does not receive
insurance money for its two malfunctioning satellites that are in orbit.

washingtonpost.com

The company, based in the District, netted $150 million from its sale of
more than 11 million shares of stock to divisions of Legg Mason Inc.,
the Baltimore investment firm, and another unnamed institutional investor.

XM will use the proceeds to pay for XM-4, a $130 million spare satellite
that the company has ordered from Boeing, "if insurance proceeds are not
received in a timely manner," the company said in a statement yesterday.

Shares of XM rose 27 cents yesterday, to $15.84. Including the new
shares, XM has 135 million shares outstanding.

The company chose to place its shares directly with investment firms to
avoid "several million dollars" in underwriting fees, said XM spokesman
Chance Patterson.

The company's two orbiting satellites, nicknamed "Rock" and "Roll," are
not generating adequate power because their defective mirrors are not
reflecting enough light onto their solar panels.

XM's insurer has denied the company's initial $400 million claim on the
two satellites. It contends that the satellites are still operating
above their insured level and that XM has violated certain policy
provisions, according to XM.

Negotiations with the insurer are still in progress, Patterson said.
Last month, Hugh Panero, XM's chief executive, said the company is
prepared to pursue arbitration or litigation to settle its claim.

The satellites, launched in 2001, have life spans of 17 years if working
properly, but their defects will force the company to bring them down in
2008. XM also plans to launch its existing spare satellite, XM-3, in
late 2004 or early 2005 to supplement its failing satellites.

The satellites' problems are not affecting the quality of XM's radio
broadcast, the company said.