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Thread: Could Investors actually save the company?

  1. #1
    Newman is offline
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    Could Investors actually save the company?

    As everyone well knows, the debt issues of this company are far outweighing the positive news regarding the rapidly improving metrics. This has kept the investors of this company hurting from the precipitous decline in the stock price. There have been some people that have been badmouthed by Sirius Longs (myself included - as a basher I mean) that have actually had some fairly decent insights into the company. I decided I would bring them to this thread for discussion:

    Jim Cramer: "The common stock is nothing but a lottery ticket. The people that control the bonds control this company. Buy the Bonds, not the common."

    Micheal Hartlieb: "Allow investors to buy bonds in the company to help pay off debt, rewarding long term investors two-fold"

    What if these were actually feasible ideas?

    Here is my opinion: Sirius XM is on the verge of becoming a cash cow, but they must get past the 2009 debt before they can go any further. The problem with this is the US is in one of the worst economic recessions/depressions of all time. The outlook on the street is bleak, Moody just downgraded Sirius, and the stock is priced for Bankruptcy.

    What if Sirius came out and offered shareholders on record (includng institutions) the opportunity to purchase debt bonds? Rather than regulating their bond sales through the banks as is traditionally done, bring it straight to the investors. The issuance of Senior Secured bonds (secured by all assets of the combined company) in increments of $1000 each with an interest rate of 12-15% (they are Ca class bonds afterall) paid biannually that mature in 2018/2019 (10 year bonds) but are callable at any time with no penalty to the company other than the payable interst upto the next payment date.

    This is a win/win proposition:

    The deal is available only to current investors, rewarding those holding the stocks with a bond with a good yield.
    If successful, the deal will take care of short term debt needs, lifting the price per share, which also rewards current investors.
    The company gets the financing it needs, with terms that are not horrible, and can be paid off as soon as the company starts making money without penalty to the company.

    I would definately be incouraged to pick up some of these bonds with those kind of terms. Sure, the company would have to sell 100 million bonds at 1 grand each to raise 1 billion dollars, but I think there are enough institutions and private investors who can afford to pick up at least a couple of these puppies to make the efforts worth their while.

    What do you all think?

  2. #2
    just sirius is offline
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    Newman

    This idea has been thrown around on other sites, but no one has explained it so easily as you have. It is a great idea. Why don't more companies use this type of financing. I know this is not your typical way to raise capital to pay off debt, but it sounds better than dilution or convertibles with outrageous terms.

  3. #3
    Newman is offline
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    As a little disclaimer, I am not a bond man and I dont know what all goes into these kind of things.

    I am just as confused as you are: This sounds WAY too easy to not be done. I am thinking there may be something more behind it. I am hoping that Homer or Tyler will stop buy and comment for some clarity.

  4. #4
    Siriusowner is offline
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    Wouldn't it be adding more risk to an already risky position ? Junk bonds are quite risky, even if they are "preferred bonds".

  5. #5
    just sirius is offline
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    If Mel has to go begging for money. Why not beg to someone who actually cares about the success of the company! I know that another 2-3K for the eventual return of my original investment of 40K sound pretty good to me!

  6. #6
    just sirius is offline
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    yes it would. But if you have the funds and are not afraid to put them up, and are able to live with the eventual outcome, it would be a small risk to take.

  7. #7
    just sirius is offline
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    Thumbs up

    Siriusowner

    thanks for bringing some rational thinking to this thread. many times, the posters can't seem to get out of their own way and subsequently cont to make irrational decisions(me included).

  8. #8
    just sirius is offline
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    Lightbulb

    Siriusowner

    Slap me around if i begin to fall into the forementioned category.

  9. #9
    Newman is offline
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    Quote Originally Posted by Siriusowner View Post
    Wouldn't it be adding more risk to an already risky position ? Junk bonds are quite risky, even if they are "preferred bonds".
    You are correct, they are quite risky. The fact that they are "secured" or "preferred" bonds make them less risky, but there is still a risk. Many would not be willing to take this risk. Many would, in my opinion. Would it be enough? Who knows. That is why the risk is partially offset by a high interest rate. Many of the current bonds are at 10 and 14%, so 12-15% may not be high enough, but if it was successful, I think Sirius XM would be in a very strong position going forward, leaving the stock (and bond) holders in a very good position.

  10. #10
    J56D is offline
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    This question was asked during the stockholders meeting. Mel seemed to brush it aside saying that it was too complicated to do.

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