Prepackaged Rumor

I have many people asking me about a pre-packaged bankruptcy rumor. Here are my comments:

1. I have seen nothing to indicate that the company has a "pre-packaged" bankruptcy plan. Until such time that someone can produce something that is verifiable, I will take it with as much value as I place on "Apple Rumors".

2. I would not be surprised in the slightest if Sirius XM, being in their current position, has not considered many differing options, inclusive of speaking to bankruptcy attorney's. They would not be responsible managers if they have not considered several options. That being said, I do not think bankruptcy is among the top choices in the direction for the company.

3. The company now has many more authorized shares to work with (3.5 billion more than they previously had). This gives management a lot more latitude with respect to financing and operations. These additional avenues are all aveneues that would be taken before bankruptcy is considered IMO.

With Sirius issuing stock to debt holders it is impossible for them to have a bankruptcy objective. There is a moratorium placed on stock trading and issuance by insiders and the company if there is talk within the company of an issue that will materially impact the company or it's business. Bankruptcy would certainly qualify for triggering this moratorium.

It is for this reason that executives within the company (any company for that matter) are barred from trading stock a certain period before the company announces earnings each quarter. It eliminates the possibility of a perception that there is insider trading based on un-revealed information.

Sure, Sirius may have a plan on he books that would detail how a bankruptcy filing would effect the company. Actually many companies have this plan. I think for a company issuing bonds, a plan like this is usually required by the bond holders. It doesn't mean the company will file for bankruptcy though.

I think we are all kidding ourselfs. The real question is why would this company not file bankrupcy? I'am new to this site, but from what I understand the company could do just that, and as a company be better off. They would louse all the share holder. They would be no longer straped for cash . The company is just a year away from having a positive cash flow every year. If you were going to make a bet it would be a good one they file for BK. The slow economy and the decaying stock marker would be a great cover for pulling this off. I'am on the wrong side of the fence on this one I have 30K invested at $2.35 and at .21. I hope I am wrong, and I will allways stand to be corrected on this one.

Ron, you are partially correct, except for a couple of items:

1) Some of the debt is considered "senior secured", which means that the debt is secured by virtually all of Sirius XM's business as collateral. This portion must be paid off or refinanced even if BK is delcared.

2) The public image. Would you like to pay for a year or 2 years of service up front in a service who just announced bankruptcy? Would you continue your service with a business who just announced bankruptcy? Would you go into BestBuy and purchase a radio off of the shelf of a company who just announced bankruptcy? Would you ask your dealership to include Sirius XM Radio in your band new car if they had just announced bankrupcy?

The consequences of declaring bankrupcy can extend quite far away from the initial financing and debt problems of a company considering it.

Sirius XM has financing options. They could pay off Feb debt with cash on hand TODAY. They could attempt to renegotiate May bank notes to extend their due date. THey could renegotiate another convertible note for the debt due in December. THey could do a sale-leaseback on a few of their satellite Transponders the way XM did a couple of years ago. They could sell a few of the terrestrial radio towers that they are required to shut down according to the FCC mandate. They could offer high yeild short term loans (offer them to shareholders possibly?). Would YOU buy a $1000 bond with a 12% semiannual interest payment? I would, and so would many others.

Sirius XM has a lot of options at this point. As you said, they are just a year away from having postive cashflow. They could take a high interst deal now as long as there was no early termination clause, and pay it back as soon as possible. It wont be their first option, but I can almost guarentee that this option would come before BK.

New to the thread.. thanks for the information. do you know the approx $ amount of senior notes that Sirius has. If it is a significant number it would be a deterrent to BK. Also, do you have any idea what might happen to the SP if XM is allowed to BK?