One worry for sector watchers regarding the merger is the refinancing of putable debt. With credit markets strapped for cash people worry that the merged company would not be able to reach terms that carried a reasonable rate. One key aspect of the current bonds is the value of them as they stand vs. the potential value in relation to a merger. Simply stated, would bondholders rather have the current situation, or be a bondholder of a merged company that will deliver synergies.

Cowen analyst Tom Watts believes that current bondholders and management could have an "agreement in principle" by the end of May. The analyst also notes that management had temporarily stepped away from the refinancing talks in order deal with issues at the FCC. According to Watts, "Timing of the FCC review, and pace of negotiations with XM and SIRI, suggest an approval (FCC) could be handed down as early as June, prompting management to make both announcements together."

While this news is positive in a couple of aspects, it also indicates that FCC approval could still be a few weeks away. It goes without saying that the FCC process would be down to discussion on various drafts that Chairman Martin had drawn up about a month ago. It is our opinion that the sticking points deal with spectrum, minority ownership, and public interest channels. An FCC decision can come without notice.

Watts also notes that Sirius could return to pre DOJ levels which implies a 25% upside.

Position - Long Sirius, Long XM