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I found this Sirius/XM document on the internet with debt structure information. It says at the top - "Offering memorandum - Strictly confidential"...
There is a debt structure chart on page 10...
Is there any new info here?
http://www.morganstanleyindividual.c...?DocID=p_SIRI1
This is a nice document... everything is clearly stated.
Ok, so the 300 million notes due in Feb 2009 are only at 2 1/2 percent... This seems very low.. Does anyone know why they are so low?
In my opinion, it looks like the company should easily be able to refinance... I honestly don't know what the big fuss is about. The bond market is a huge market, so why can't Sirius just float out 300 million in callable junk bonds at 12% and that's it? I think there would be more than enough people (individual investors and institutions) who would pick up the bonds. And when the crisis is over, they can call them in at 15% over par and refinance on better terms. Sure, it's not ideal but it works.
What is the problem with this? Please tell me if you disagree? Junk bonds are in the gutter now too, I know, but there is still capital available, and in a recession, a lot of the times junk bonds (bonds in general) are looked upon more favorably.
I am sure they could do that... they could also exchange the current bonds for new convertibles...
The problem is, anything they exchange these bonds for will probably be more expensive than the 2.5% coupon that they are currently sitting at. Anything more expensive means more revenue lost. The fact of the matter is that I really thing the Feb 300 million is going to be paid out in cash and then they will focus on the bank loans due in June/July and the December converts. They will be able to get better financing a little later down the road.
Mel just needs to TELL US that is what he plans on doing. That would help the stock emensly.
Newman,
I sent a message a week ago to Sirius XM IR stating that I won't put another dime into common unless Mel gets on a megaphone to build confidence. You are dead on regarding him announcing his direction on the Feb debt. It would be very helpful. I want to pull the trigger on enough more shares to get averaged down from where I am, 1.50, to 1.20 or better. Won't do it though and will remain on hold until there is some clarity.
FWIW, Karmazin did state what the plan was for the maturing debt next year -- but has been silent since. Which raises the question that the plan isn't working... I understand that, given the current debt market.
That said, what Mario brings up IS the one of the worst case scenarios -- along with exchanging the maturing converts into new converts... that is the worst case scenario. I do not believe that we have reached that point yet.
With the FED's buying into the banks and essentially funding them -- I see Sirius still being able to take a $150 million term loan (which is the original plan) and using cash flow from Q4 to buy back the debt in February. Unfortunately, they cannot buy it back UNTIL February. So I am not surprised by the silence -- because there is nothing to do or say until then. Short of Karmazin saying, we got a term loan and will buyback the notes in February... however, that obviously hasn't happened yet. And thanks to Goldman Sachs for F'ing it up and making it difficult for them to do anyhow.
It's a tough position for them to be in -- and I just don't see them in a position to say much... or at least until they secure a term loan... and/or give in to Goldman's requests for a new convert. Then refinance them in a couple years.
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Homer,
I always appreciate your commentary... Was there anything new in that document? Why does it say "strictly confidential" at the top? What is confidential about it?
I agree with you that there is not much Mel can say until he either secures some financing (better to wait in this environment) or feels financially secure enough to say that they would pay for it in cash. Anything Mel would say in this recent environment might not have the most bang either, but maybe it would catch the shorts off guard? Why can't they pay it off early? They could set the money aside or put it in escrow or something?
You are right in pointing out that Mel has already stated what the plan was for the Feb '09 debt. People complain about his silence, but what else is there for him to say? Why borrow money in this ugly environment when you don't need it for months? I think the money they generate from the best of packages (and the way they did it by renewing contracts) along with the new retail radio and package offerings will put them in a strong financial position to face the '09 debt. The only thing Mel could say was that they had tons of people sign up for "best of" packages which puts them in a position to pay off the Feb '09 debt in cash......
Comments about the Feb. '09 debt from the Q2 earnings conference call...
Mel Karmazin
So now let me address some of the questions that we have received. First, many of you have asked about our 2009 maturities and our current liquidity position, so let me have David address that one.
David J. Frear
So Sirius XM ended the quarter, the June quarter with pro forma cash and cash equivalents of approximately $442 million. In 2009, there are three maturities to focus on. At the parent level, there are the $300 million in 441 converts that are due in February. If the stock doesn’t clear the 441 conversion price before then, we’ll look to refinance them through a combination of use of our existing cash, bank or high yield debt, and if it makes sense, perhaps additional converts as well, or replacement converts as well. At the XM subsidiary level, there’s $350 million of bank debt that is due in May. The banks have been very supportive, consistently very supportive of the efforts to merge the companies and in fact the bank line was actually increased by $100 million in late June. The credit profile of the company for the banks will improve dramatically over the course of the next year, making this loan even more attractive than it is today. I have every reason to believe the banks will extend the maturity at market rates next spring. And then lastly, the XM sub also has $400 million of converts due in December of 2009. As you know, we’ve provided guidance of pro forma EBITDA exceeding $300 million and growing next year. We will be effectively at the precipice of delivering that at the time that we look to refinance those notes. And I like the odds of entering the fall of next year with a radically improved credit that is beginning to show normalized leverage ratios and taking that issuer to the debt markets to refinance the December ’09 converts. And then lastly, both companies have consistently made full funding statements in their public filings and those statements remain true today.
Mel Karmazin
Thanks, David. So you can see how we feel highly confident about the company’s liquidity position. Secondly, we’ve received numerous questions regarding the financing activities which took place the night of the merger approval and closing. While the financial markets have been very unattractive, Sirius and XM were very successful in raising $700 million in new high-yield debt. It was over-subscribed from the $400 million we initially targeted, and $550 million in a new exchangeable note offering. We also entered into a share borrow facility in order to assist the convertible arbitrage necessary to market the deal. That facility did not represent new proceeds to Sirius, nor will it be dilutive for accounting purposes. Not many high-yield companies have recently tapped the markets and we are pleased that we were successful in getting our transaction financed. We needed to close the transaction as soon as possible for several very important reasons. First, regulatory approval took too long and we did not want to add to any further delay for the process. Second, we have very good reason to believe that some that oppose the merger might run to court and seek a stay, and the last thing we wanted was to not close. So we took the best deal available to us to get the transaction closed, in spite of the difficult terms. We obviously could have waited. We could have seen if the market would have improved. We thought that it was in our shareholders’ best interest to close the merger because they waited too long to get this transaction done. We are well aware that the stock price has suffered. I am not pleased with the market reaction. You have all seen my own public purchase of 2 million shares this week. I had been restricted from buying Sirius stock from the time I began merger discussions, which was over two years ago. The bottom line is this -- Sirius received FCC approval, accomplished the financing, and closed the transaction. We intend to work very hard to deliver on the value of this merger and meet our objectives. Third, we have no plans for a reverse split. It’s hard to see how that would add any value to our company. Fourth, we are working on the combined company’s fourth quarter offerings at retail and you should anticipate that the best of both packages will play a very large part in those plans, which should stimulate after-market demand. Stay tuned.
Holy crap, what more do you people want. Mel has already said all that, and even gives clues that GS would like nothing better then to reconvert the old ones and that is the last thing Mel would want to do. How many times does it need to be said for god sake. I am sick and tired of people saying Mel needs to say it, when he already has. Then you people wonder why he comes out with a comment like "unsophisticated investors. What do you need 1 + 1 = 2.
Demian, Well said. Why is it few others seem to find this information.
Mel Karmazin, on September 9th at the Merrill Lynch 2008 Media Fall Preview, then said that they were not interested in extending the converts and that it was not in the best interest of the company. He said that they will pay it off with a combination of cash on hand and financing (senior secured notes?). He said that he had been in conversations with banks about this and he felt it would not be a problem at all. The stock got hammered before, during, and after his speech...
You can listen to his comments here.....
http://investor.sirius.com/
John,Quote:
Originally Posted by john
I also found this comment from Mel in the Q2 CC transcript...
Mel Karmazin
"...the only group that should not be pleased so far are our shareholders. We know we have a great deal of work to do to have shareholders feel the same way as our other stakeholders feel and we take that responsibility very seriously."
Does this sound like someone who is planning bankruptcy?
Demian, I seen that also (your link, thanks though). That is what I am talking about, when people that say Mel needs to say how he plans on taking care of the Feb. converts. It is like they dont read or listen. I would have no problem with that kind of investor (dont read or listen) but then just shut up about the stock or CEO. I cant stand people that want to bitch and moan about a stock they have no clue about. I have said many times the debt they are dealing with is not that big of a deal, it is more of a matter of the terms and how bad they are, then anything else. I have said Mel has talked about this many times already. Like I said if people dont want to do the research on a stock they buy thats is fine, but then dont come here and other places and bitch about something they dont have a clue about. That just spreads the rumors and bad feelings. It just pisses me off when I here from people "Why has Mel not said anything about this". I mean what, does he have to come out every day and say it, people cant do their own research and look the shit up. I also have no problem with the people that just ask for the information, it is the ones that come here and bitch about Mel saying nothing and ask why has he not done so.
Thx homer985. I know the plan, can speculate on the silence, and understand the current situtation. Maybe Mel will, without opening mouth and inserting foot, provide some useful, beneficial, MUCH NEEDED info at the Dow conference in a couple days. Although it's a remote possibility, I especially want some news or information directly from Mel that will build confidence among existing longs and make the short interest ratio decline faster.
PMO,
I am hoping he will say what a smashing success the "best of" packages have been and due to their success, there is no problem in paying the Feb. debt off in cash...
Would the stock take off then?
Here is a transcript of "the plan" as laid out at the ML conference awhile back...
It is my opinion that Sirius has more options than just banks and brokerages for borrowing the money. They have the ability to borrow from private investors as well... NOTE: In early 2007, XM did the Sale Leaseback on the Transponders on XM-4 with private investors, which raised $288 million; also in early 2003, XM place $300 million worth of 10% Convertible notes with private investors... those notes did not trade and in fact, $33 million of them are still outstanding -- all held by Honda. The point here is that if they cannot place traditional bonds on the debt market, they can get bank loans -- or a private placement with private investors.Quote:
We currently have a Sirius convert of $300 million, that is due February of 2009. We have already had conversations with banks about securing the cash, okay, in order to take out that convert. You shouldn’t be surprised that the holders of the convert have been very anxious to talk to us about, “gee, we’d like to exchange that for another piece of convert”. That is not the interest that the company has. The company has, is that we will raise the debt – the combined with our approximately $450 million of cash that was on our balance sheet, the last time we report it, which was the end of June. So there was $450 million of cash, we are looking to raise bank debt – probably senior secured, because we have basket in which we can do that. Probably a term that will be a couple – three years – short term; and that will take out that issue. When will we do it? We will do it, this time more opportunistically than we did, last time. When would I like to do it? I’d like to do it, sooner rather than later. Because I’d like to get this question mark out of everybody’s mind, “What are you going to do about that Feburary 2009 convert. The market, based on everything I’m told is assuming we may have to raise equity to deal with that. So let me resolve that as fast as I can – and show that I don’t need to do that. And I think that that would look positive.
I also note that there still has been no indication from Sirius XM of how much the $1.1 billion in tender offers were subscribed to. I see that there are still some 9.75% XM Notes trading... so obviously not all of these $600 million took the tender offer. If 90% of the holders took the tender offers... then that means that there is $110 million left over from that refinancing at the time of the merger closing.
So when you combine whatever was left over -- with the increased cashflow from those taking the "best of" packages; and the typical Q4 positive cashflow... then combine all of this with a small bank term loan or a small private placement -- and I believe that they'll be able to buyback the Feb09 converts.
Again, it is the Dec09 converts that I have no thoughts about yet - that concern me the most.
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Homer,
Thanks for posting that. Where did you get the transcript? Is there a link to it online?
I did not see anything new in the document...
As for the transcript, I transcribed it from a recording of the ML conference from early/mid September. I discussed it in this thread originally: http://siriusbuzz.com/forum/showthread.php?t=745
You can hear the "full plan" that Karmazin gave on the debt here:
http://www.4shared.com/file/62672080...?cau2=403tNull
You'll note that the transcript is the first part of this recording -- but the whole thing is not transcribed. The recording runs about 5 minutes.
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Homer,
Thanks for the link to the audio file and for transcribing, posting Mel's plan.
I hope that the timing is right when Mel addresses this issue again...
Didn't Mel say the Dec. debt wasn't an issue because he was just going to extend it? ie not pay it off, not refinance, just get an extension?Quote:
Originally Posted by homer985
Comments from the Q2 conference call...
Mel Karmazin
So now let me address some of the questions that we have received. First, many of you have asked about our 2009 maturities and our current liquidity position, so let me have David address that one.
David J. Frear
So Sirius XM ended the quarter, the June quarter with pro forma cash and cash equivalents of approximately $442 million. In 2009, there are three maturities to focus on. At the parent level, there are the $300 million in 441 converts that are due in February. If the stock doesn’t clear the 441 conversion price before then, we’ll look to refinance them through a combination of use of our existing cash, bank or high yield debt, and if it makes sense, perhaps additional converts as well, or replacement converts as well.
At the XM subsidiary level, there’s $350 million of bank debt that is due in May. The banks have been very supportive, consistently very supportive of the efforts to merge the companies and in fact the bank line was actually increased by $100 million in late June. The credit profile of the company for the banks will improve dramatically over the course of the next year, making this loan even more attractive than it is today. I have every reason to believe the banks will extend the maturity at market rates next spring.
And then lastly, the XM sub also has $400 million of converts due in December of 2009. As you know, we’ve provided guidance of pro forma EBITDA exceeding $300 million and growing next year. We will be effectively at the precipice of delivering that at the time that we look to refinance those notes. And I like the odds of entering the fall of next year with a radically improved credit that is beginning to show normalized leverage ratios and taking that issuer to the debt markets to refinance the December ’09 converts.
And then lastly, both companies have consistently made full funding statements in their public filings and those statements remain true today.