WSJ: Echostar Acquiring SIRI debt

[SteveSirius]

Interesting article was just posted on Wall Street Journal online (it is cut and pasted below):

By MARTIN PEERS

Mel Karmazin undoubtedly hasn't forgotten the four tumultuous years he spent shacked up at Viacom with Sumner Redstone. So it's a good bet the CEO of Sirius XM Radio doesn't fancy the prospect of working for another strong-willed mogul: Charlie Ergen.

For that reason alone Mr. Karmazin is sure to spend the next 10 days searching high and low for $175 million he needs to pay off bonds held by Mr. Ergen's Echostar Corp. Otherwise he faces the prospect of Echostar trying to muscle its way to at least partial control of Sirius.

Don't bet against Mr. Karmazin. Beneath the roughly $3.3 billion of debt now dragging the satellite radio company back to earth lies a decent business with around 19 million subscribers. Cost cuts flowing from last summer's merger of Sirius and XM should take the company nearer to profitability - although the recession will hardly help.

Sirius could prove attractive to companies like Verizon or AT&T, both of which have national wireless footprints that might dovetail with a satellite-radio service. Liberty Media could also be sniffing around.

Still, Sirius needs serious money. Leaving aside this month's bond maturity, the company has $350 million in bank debt due in May and another $400 million in bonds due in December. Without the means to deal with those maturities, paying off this month's bonds only buys a little time.

One thing is sure. Having sunk $2.7 million into Sirius stock just last August, Mr. Karmazin will be keen to avoid a Sirius bankruptcy filing. If he has to yield to Mr. Ergen to avoid that, he likely will. Then Wall Street can settle in for a new clash on the corporate airwaves.

[SiriuslyLong]

Thanks Steve - that appears to be positive for someone like myself (i.e. in deep).

[sxminvestor]

Does anyone have the Wall Street Journal subscription to post this new article in full:


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

[trippingthespeculatingpos]

Here you go... from WSJ.COM

By MATTHEW KARNITSCHNIG and JEFFREY MCCRACKEN

EchoStar Corp. and Sirius XM Radio Inc. have been engaged in talks for several weeks about EchoStar's interest in the troubled satellite-radio company, but have failed to come to a resolution, according to people familiar with the situation.

Sirius is trying to avoid a bankruptcy filing and the possibility that the EchoStar could take control of the company on a hostile basis. But that could prove difficult, given the difficulty Sirius has had raising the $175 million necessary to satisfy a debt payment to satellite-television provider EchoStar and other bondholders due February 17. Sirius didn't respond to a request for comment.

EchoStar Chairman and Chief Executive Charles Ergen, who is believed to be seeking control of Sirius, has been accumulating Sirius debt since late summer, the people said. EchoStar holds most of the satellite-radio operator's debt that expires in February and owns more than half of a $400 million tranche coming due in December. Both stakes were purchased from hedge funds. Sirius's total debt load is $3.25 billion.

Until Thursday the debt coming due in February traded around 80 cents on the dollar, and the debt coming due in December, around 36 cents on the dollar, according to Thomson Reuters. Thursday afternoon, after EchoStar's purchases were reported, the debt was trading around 90 cents and 40 cents, respectively. Sirius's shares rose two cents to 17 cents.

A spokesman for EchoStar declined to comment on the strategy behind acquiring the debt. It remained unclear what Mr. Ergen would do with Sirius if he acquires the company. Mr. Ergen also controls satellite-TV provider Dish Network Corp.

Seeking to take control of a company by acquiring its debt is an unorthodox strategy and could backfire. The debt EchoStar holds is junior to $600 million in bank loans Sirius has taken out. In the event of a bankruptcy filing by Sirius, the bonds held by EchoStar could be worthless. But Mr. Ergen could be counting on negotiating a settlement with the banks that would allow him to seize control.

Still, a bankruptcy filing could offer advantages to Mr. Ergen because it would allow Sirius to extract itself from costly contracts, including a $500 million, five-year agreement with radio personality Howard Stern. On his show Thursday, Mr. Stern said he didn't understand the financial details of EchoStar's moves, but added, "I just need to know who I'm working for on any given day

[Hopeful]

How much accuracy can we base on this article??

Ie. The amount of Feb debt they own and the Dec debt???

Should I be concerned that they will force BK??? I know what you guys have said ive read all of the posts today but all these negative articles are getting to me ahahha "exactly what they want!"

[sxminvestor]

Tripping - thanks for the article.

Yahoo just posted another one if you can get that also. They are on a friggin roll.

Anyhow, at least there is finally some clarity to what has been going on. Does Sirius prove they have enough cash to pay down echostar debt now. This is unbelievable.

1) They have ~ 350M in cash

2) They apparently have access to another 250M revolving credit.

3) Sell some more shares for cash

4) How much cash will the Best of and price increase bring in if participants pay for 1 -3 years up front.

This is really getting interesting.

If Echostar wants them, then buy them for $1 share. I'll take that tomorrow in a blink.

Boy is Mel taking massive body shots. He is bobbing and weaving and getting kicked around, but still standing. Keep fighting Mel.

[dread]

Tripping - thanks for the article.

Yahoo just posted another one if you can get that also. They are on a friggin roll.

Anyhow, at least there is finally some clarity to what has been going on. Does Sirius prove they have enough cash to pay down echostar debt now. This is unbelievable.

1) They have ~ 350M in cash

2) They apparently have access to another 250M revolving credit.

3) Sell some more shares for cash

4) How much cash will the Best of and price increase bring in if participants pay for 1 -3 years up front.

This is really getting interesting.

If Echostar wants them, then buy them for $1 share. I'll take that tomorrow in a blink.

Boy is Mel taking massive body shots. He is bobbing and weaving and getting kicked around, but still standing. Keep fighting Mel.

I will take $5 share, for a buy out!!

[sxminvestor]

I will take $5 share, for a buy out!!

They would not pay that, but I'd I might retire to an island if that news came out.

Thanks for the dream

[dread]

They would not pay that, but I'd I might retire to an island if that news came out.

Thanks for the dream

Same here!! I would love to retire, the coming week will be interesting to say the least.

Good luck to everyone!!!

[Sworntwofun]

Ya that would be nice....