The debt in FEB...

So, let me understand, the debt in FEB is due 2/17, but these are convertibles, right ? is there something in the debenture that would prevent them from being converted to shares ?

Convertibles have a place as the currency used in takeovers but 175 million in convertibles is not enough for Ergen to takeover SIRIUS, is it ? And this is assuming he owns the 175 million debt.

Then why not just convert his debt into shares ? Is it the ratio ? the parity ? Or is it that the debt is actually not convertibles and I am mistaken?

The convertible bonds would have converted to shares if the pps exceeded $4.41 (I think that was the price). But since the price is what it is now they have to be paid back in full with cash... Unless both parties agree to have them paid off with shares of common stock. Ergen could say no to that.. force Sirius into BK... not sure how that helps him. Or take a large amount of shares as payment and try to get over 51% to be able to take control.

The 2.5% Convertibles that mature on Sunday have a conversion price of $4.41. Obviously, they are way under the conversion price -- so the holders of them can demand cash repayment at maturity.

Sirius has gotten around this by negotiating with individual holders to convert at various "current" pps strikes, as the price of the common has come down. They managed to do this with $125 million worth of the debt.

Instead of converting at $4.41 into 68 million shares, Sirius has converted them at different prices into TONS more shares, creating a lot of new dilution... but they had no choice.

According to one of the WSJ articles I read, Sirius was negotiating with the remaining holder of the 2.5% bonds (a hedge fund) to convert them into new senior debt, with some other covenants... but then last week, Ergen swooped in and bought all of the notes from that hedge fund. Now, Ergen is playing hardball. Sirius wants to convert them or exchange them into something because they don't have the cashflow to buy them back -- but Ergen wants control of the company.

Can he do it over $175 million? Well, he can certainly force bankruptcy if Sirius defaults on paying off the principle on Tuesday. Then in bankruptcy, the banks with the senior debt will like be at the top of the list, followed by the senior bonds, followed by the subordinate bonds (if they don't get canceled out with the common). But, Ergen is sitting on about $200 million worth of Sirius senior bonds -- so he does have some leg to stand on. He then can negotiate with the banks that hold the senior debt and asked to be put in charge of the company... which could happen.

It's risky, but it could happen. It's a high stakes poker game between Karmazin and Ergen -- to see who blinks first. With some big egos on the line too...



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Originally Posted by homer985

The 2.5% Convertibles that mature on Sunday have a conversion price of $4.41. Obviously, they are way under the conversion price -- so the holders of them can demand cash repayment at maturity.

Sirius has gotten around this by negotiating with individual holders to convert at various "current" pps strikes, as the price of the common has come down. They managed to do this with $125 million worth of the debt.

Instead of converting at $4.41 into 68 million shares, Sirius has converted them at different prices into TONS more shares, creating a lot of new dilution... but they had no choice.

According to one of the WSJ articles I read, Sirius was negotiating with the remaining holder of the 2.5% bonds (a hedge fund) to convert them into new senior debt, with some other covenants... but then last week, Ergen swooped in and bought all of the notes from that hedge fund. Now, Ergen is playing hardball. Sirius wants to convert them or exchange them into something because they don't have the cashflow to buy them back -- but Ergen wants control of the company.

Can he do it over $175 million? Well, he can certainly force bankruptcy if Sirius defaults on paying off the principle on Tuesday. Then in bankruptcy, the banks with the senior debt will like be at the top of the list, followed by the senior bonds, followed by the subordinate bonds (if they don't get canceled out with the common). But, Ergen is sitting on about $200 million worth of Sirius senior bonds -- so he does have some leg to stand on. He then can negotiate with the banks that hold the senior debt and asked to be put in charge of the company... which could happen.

It's risky, but it could happen. It's a high stakes poker game between Karmazin and Ergen -- to see who blinks first. With some big egos on the line too...



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Thanks. I had forgotten about the $4.41 parity.