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Thread: WSJ: Echostar Acquiring SIRI debt

  1. #1
    winagain35 is offline
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    WSJ: Echostar Acquiring SIRI debt

    Charles Ergen's EchoStar Corp. has quietly accumulated a substantial portion of Sirius XM Satellite Radio Inc.'s maturing debt in what could be the first salvo in an attempt to take control of the embattled company, according to people familiar with the matter.

    Mr. Ergen, who controls a satellite-television empire around Dish Network Corp. and EchoStar, has recently acquired part of a $300 million tranche of Sirius debt that matures on Feb. 17, according to the people. Sirius recently converted part of the debt to equity, reducing the total debt outstanding to about $175 million.

    http://online.wsj.com/article/SB1233...oo_hs&ru=yahoo

    ==========================
    Anyone have access to the full article?

  2. #2
    just sirius is offline
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    Winagan

    just saw that article. I do not have access to full article. this could be a game changer. Accumulating Feb debt is nothing. If Echo begin accumulating Dec debt, i believe that this could be an early sign of things to come. what do you think.

  3. #3
    m4svt is offline
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    that is exciting news boys, it almost makes me want to join the wsj to keep reading.

  4. #4
    Newman is offline
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    They are buying debt, not shares. You have to have a significant amount of shares in order to have even a minority interest in a company, let alone controlling interest. He might use it to get a board seat or something, but that is about the extent of it. It could also be a strategic arrangement, with Echo saying I'll refinance your debt if you pay me interest AND provide free services to my Sat company...

    It could also be much more ominous... He could buy the debt, refuse to trade for equity, and force Sirius into default, forcing them into BK where his company could pick up the company much cheaper...

    It is not all rainbows and gum drops...

  5. #5
    winagain35 is offline
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    The full article

    By MATTHEW KARNITSCHNIG, ANDY PASZTOR and SARAH MCBRIDE
    Charles Ergen's EchoStar Corp. has quietly accumulated a substantial portion of Sirius XM Satellite Radio Inc.'s maturing debt in what could be the first salvo in an attempt to take control of the embattled company, according to people familiar with the matter.

    Mr. Ergen, who controls a satellite-television empire around Dish Network Corp. and EchoStar, has recently acquired part of a $300 million tranche of Sirius debt that matures on Feb. 17, according to the people. Sirius recently converted part of the debt to equity, reducing the total debt outstanding to about $175 million. It isn't clear whether Mr. Ergen participated in the exchange, however. Mr. Ergen could also be buying up senior bank debt, due in May, which trades thinly on the over-the-counter market.

    Mr. Ergen's salvo comes as Sirius shares have sunk to just 14 cents each, and large portions of its $3.4 billion debt load trade at a deep discount. The company, which has a market value of $501 million, isn't profitable, and has lost nearly all its value since the Sirius-XM combination was finalized this summer.

    Echostar could be pursuing a plan to use the debt as a way take control of the company either inside or outside of bankruptcy. Either way, current shareholders would be left with nothing. It could push for a debt-for-equity swap outside bankruptcy, so long as it was not trying to impair or force concessions on bondholders or vendors. More likely, it is using a strategy often employed by equity funds, which will buy up to 51% or more of the bank debt, knowing the company will soon need a concession from its bank group, such as a waiver for a pending loan default.

    It can then block any such move, force a bankruptcy, and try to take control of the company in the bankruptcy process, swapping its debt for equity in the company. Under this scenario, funds often buy out at a discount other bondholders while cutting deals with banks to roll over or continue their pre-petition loans.

    With about $925 million in debt coming due this year, Sirius is up against a wall. It also owes $43 million for programming fees to the National Football League on Feb. 17, plus $60 million to Major League Baseball in March. The MLB cash is in escrow, and a person familiar with the matter says that the company is negotiating hard with the league to let Sirius tap those funds.

    When Sirius and XM completed their merger last July, it was supposed to represent a strong new beginning, with the two fledgling companies becoming an entertainment force. Instead, a 17-month approval process diverted valuable executive attention from the underlying business, and consumers grew more enamored with their iPods, mobile phones and other alternatives to satellite radio.

    In October 2004, Sirius announced it would pay $500 million over five years to hire morning-show host Howard Stern away from traditional radio. Mr. Stern started his Sirius job in 2006. The move helped put Sirius on the map, leading to several quarters in which Sirius trounced XM in new subscribers. But the move also started a pricey bidding war for talent between the two companies, saddling them with expenses when neither of them were close to turning a profit. XM quickly followed up with a deal to air Major League Baseball games, at a cost of $650 million over 11 years. Shortly after Mr. Stern made his debut on Sirius, XM announced talk-show maven Oprah Winfrey would get an XM channel in a three-year, $55 million deal.

    Those expenses have been piling up as sales have been hurting. One major hurdle for the company has been the recent nationwide plunge in car sales. Sirius is heavily dependent on new car buyers to drive subscriptions. Sirius will have trouble significantly growing the business until the economy picks up. On the flip side, it will save money on payments made to car companies.

    Mr. Ergen's debt gambit comes as his primary business, the Dish satellite-to-home network, faces escalating problems in an increasingly competitive environment. Dish has suffered a net loss of subscribers during some months, and continues to fall behind satellite- and cable-television providers in attracting new customers. Although Sirius and EchoStar have differently designed satellite systems that could be difficult to combine, Sirius also has a network of ground facilities that could be important to EchoStar.

    Mr. Ergen has long sought such a footprint on the ground able to strengthen signals received by mobile users. Over the years, Mr. Ergen has tried but failed to expand his core business. He has dabbled in providing Internet service to rural homes, talked about becoming a major provider of wholesale satellite capacity and looked at ways to meld satellite and ground systems to provide entertainment to mobile devices. But for the most part, those efforts haven't taken off, and Mr. Ergen has told associates that EchoStar was looking for a new strategy.

    An EchoStar spokesman declined to comment. Sirius didn't immediately respond to a request for comment.

  6. #6
    winagain35 is offline
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    The WSJ doesn't paint a very positive picture for common shareholders, BUT they are typically pretty bearish on Satrad. I agree with the previous post that acquiring the Feb debt won't garner Echostar much clout - but the December converts - that could be bad news. Those bonds are currently trading at .30 on the dollar. CHEAP.

  7. #7
    Newman is offline
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    Wow, I read alot into that that was actually in the article.

    So we have a failed businessman with multiple failing businesses trying to buy debt in Sirius to potentially take over the company...

    I hope this never goes through. I would have to rethink my lifetime sub if he took over. This also does not bode well for me or us as shareholders. I tried to buy some December 09 debt... there was "none actively trading at this time" according to Scottrade. And yes, the debt is very cheap...
    Going on an average of 40 cents to the dollar (some of the 2013 debt is actually trading around 18 cents on the dollar, december 09 is trading around 30), someone could actually snatch all of the debt up for about 1.3 billion and virtually own this company.

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    Hopeful is offline
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    How possible is this?????? Hmmmm this sounds scary!!! I didn't even think of this scenario....
    Last edited by Hopeful; 02-05-2009 at 01:57 AM.

  9. #9
    just sirius is offline
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    Newman

    Anyway to find out if Echostar has that kind of cash. Your right, their business model has been failing on all fronts. Wouldn't they have to report these purchases in a filing with the SEC.

  10. #10
    just sirius is offline
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    If he BK's the company, what would happen to your lifetime sub? Could you cancel and get a refund on unused portion?

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