WSJ: Echostar Acquiring SIRI debt

[Bulldog17]

An accurate analogy of what Echostar is doing

Three things to keep in mind, #1 Echostar has not accumulated nearly 51% of SiriusXM debt (necessary)therefore it cannot take control,

#2 Echostar would need Sirius to default on the Feb debt for the courts to entertain their interst.

#3 If on the other hand Sirius pays the Feb debt due of $174 million then Echostar will have to stand by until May debt due and repeat the process.

#4 Is where it gets FUN. If Mel is the Mel that Wall street thinks he is, and happens to take care of the February and May debt all at once then ECHOSTAR will have to convert the debt it purchased into equity sending the stock to 52 week highs instantly. So in retrospect Ecostar could get paid the conventional way by simple appreciation of the stock price.

Now, Again I must warn that in my opinion, It is exactaly the #4 scenario that Mel was thinking of when he said " the Shorts will get Screwed along the way if they bet against us"

Not a fact (YET) just a warning!



>>>It's a highly risky way to take control and could easily backfire... remember Echo has $300M at stake.



Well not quite $300 million, but likely over $200 million. And it is risky, given their holdings would be junior to the bank debt, as noted.

My guess is that Sirius was trying to convince ECHO to a equity for debt swap on the remaining amounts of the Feb09 that they hold -- and ECHO was demanding too much... like a new senior convertible or to exchange it for preferred shares or something like that... and will not take the common, that Sirius likely offered them. That's probably what this is all about. Sirius still has the ability to just use cash - but that would certainly put Sirius in a tough position going through 2009, unless they can finally put together a new term loan, as they indicated they were interested in doing.

As for the Dec09 amounts -- obviously ECHO didn't pay face value for them, so they got that $200+ million at a deep discount. Sirius will have their work cut out for them to refinance that debt later this year. Even if Sirius clears the Feb and May hurdles -- I would not be surprised to see that the overhang from ECHO and these Dec09 bonds will hit the pps hard all year.


PS - As I suspected this afternoon -- ECHO had no purchases of the May09 bank debt. JPM and UBS have too much at stake with those holdings to just sell them to ECHO.

[imromo24]

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

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

$4 sounds tasty.

[Sworntwofun]

Why would Mel take $1 a share when his Mel's average cost for his 5,500,000 shares seems to be $3.90/share for a total of $21,460,000.00. Now worth $770,000.00. that doesent compute....maybe $5

[doobz26]

Bulldog,
I was under the impression that Echostar is purchasing the bank debt and not the convertible debt. I read that somewhere.

[john]

I think this is all crap. lets see we first see reports of Feb., then May, then Dec., now it is back to May again. These people should get their shit straight before reporting anything. They should have the amounts and dates at least some what accurate. I mean my god they should have at most said that they "MAY" have some of Feb, some of May and some of Dec. to make up a total of aprox. 400 million. That at least would have been more reasonable then switching the story every 2 hours.

[Demian]

"Sources say..............."

[homer985]

One of those copy/paste posts from Yahoo above look familiar ;~)

Anyhow, I think today's WSJ seems to have a little more accuracy in it. As I suspected, ECHO hasn't been buying up the bank debt -- as most of the May stuff is held by XM's investment bankers (JPM and UBS). So that makes it difficult for them to go that route.

I think what ECHO was trying to do was to buy up as much 2009 debt as they can -- in case Sirius goes BK... then they can be there to be part of the new company. Shrewd. I don't know that they will "force" them into bankrupcty, but they're not going to help Sirius out any neither.

Here's what I think happened...

ECHO went out and picked up about $400 million of Sirius XM's debt -- probably paid about $235 million or so for it on the market.

Sirius set out to convert as much of the Feb09 debt to shares as possible -- and they got it down to the final $170 million or so that ECHO is sitting on. Sirius offered them shares for the bonds, but ECHO said no. Possibly counter offered to take preferred shares and/or warrants and/or new convertibles and/or seats on the BOD -- or something like that... and Sirius said no.

Now we are to the point of who blinks first... I don't think that ECHO will, as they can let it go to BK because they understand the full value of the assets will leave them with plenty to cover all of the debt holders; and they can probably negotiate with the banks to be put in charge of the new company.

I don't think Sirius will blink either and give in to ECHO's demands -- but that doesn't mean they'll let it go to bankruptcy neither. Sirius' partners have too much to lose (the contracts and investments) in bankruptcy... ie, GM, Honda, Ford, Chrysler, MLB, NFL. So Sirius will find a way to raise the cash needed to cover the maturing $175 million, plus the $44 million owed to NFL and $60 million owed to MLB. Where? Good question. That is nearly $280 million needed here in Q2.

Sirius has some cash, but is going to need help. One article suggested that Sirius will sell shares on their own to "another" investor at these levels -- and use the money from that; plus, Sirius still "could" get another term loan, as they are not fully levereged out yet. They also have some cash on hand that can be used.

And finally, they could also go back to their partners -- GM, Honda, Ford, Chrysler, MLB, NFL. Obviously the auto OEM's are hurting right now, but they don't have to lend Sirius money to do this... all they need to do is create a facility for Sirius (perhaps a joint facility) which goes to each of the OEM partners, based on their payment amount (or several smaller facilities for each OEM). Instead of Sirius or XM paying GM, Honda, Ford or Chrysler their revenue share (or whatever payment)... they instead "draw" on the facility -- basically an I O U to them. And it has a limit, based on the size of the basket that Sirius has left. Remember, they said they had a basket of $200 million available, back when the Feb09 bonds were fully at $300 million... I speculate that if that goes to zero, then the size of the basket "should" rise to $500 million, no? So Sirius could create facilities with their OEM partners up to that amount... and instead of making payments to them this year, they would instead owe them -- and pay interest on the amounts. That would drastically cut cash expenses -- freeing up the cashflow to be used to buy back the Feb09 bonds.

Another option is the MLB escrow... this is another expensive contract that could get voided in bankruptcy court. What's more important to MLB, getting the $60 milllion owed to them annually for 2009 through 2013 ($300 million total); or is keeping the escrow filled with the $120 million more important? Wouldn't it be more important to MLB to allow XM to fill the escrow account with a letter of credit -- and allow them to have the cash back to use for their debt payments?

There's a lot at stake here -- much more than JUST the shareholders.

I think Sirius makes a combination of moves from above to satisfy the maturity of the Feb09 bonds; I think they extend the May09 bank loans; but I still have a problem with the Dec09 bonds... I always have.

I wouldn't be surprised to hear that that is why Karmazin was so pissed about XM's debt -- he found out about the strict covenants with them... and that they were getting bought up by ECHO, who was going to hold it over his head. They got to find a way to refinance that Dec stuff.


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[hoping2rise]

If Mel really wants to save this company and his portfolio, can he not ask the shareholders for help? After all share holders are the owners of the company and as some people discussed earlier, can't we all chip in with something to save our investment instead of speculating and shorting?
What if Mel comes out and announces Q4 results with COH and expresses strong will to save sirius and comes with a plan where shareholders can contribute in some way... if even 200K individual shareholders come up with an average $1000, we have $201 million right there (added $1M from Mel )

If it was a company owned my me, demian, trip, bill and all other good souls here, we could have done that..

Please don't bash me... I just can't think why something as simple as this can not be done?

[Bulldog17]

I GOT THE ANSWER FINALLY, NOW IT ALL MAKES SENSE 30 minutes ago

Since the Merger of SiriusXM took place July 28th 2008 Changes to Programming have led the way in new developments. These changes in programming seemed confusing to me because instead of enlargening the specturm they reduced the spectrum.

In essence both companies sirius and xm operated individually with roughly 150 channel each ok? Now combining both companies should not warrant the removal of the strobe channel or Backspin any other channel for that matter due to the spectrum that doubled upon the merger.

Insted Mel has done the most intelligent thing possible and thats to free up XM'S satellites and sell it to Echostar, Sirius's orbiting satellites are not compatible with Echostars Set up but XMs Geostationary satellites are exactly what the doctor ordered.(ECHOSTAR)

Remember that Cutting costs also included selling XM'S washington DC building. Cutting costs is what Mel does and Ridding Himself of XM'S satellites will produce the Payments of debt due. Sirius will exist with it's own original satellites beaming to us subscribers and expansion will come From FM 5 to be launched soon.
REMEMBER WITH ALL THE BIRDS IN ACTION THEY SIRIUS WOULD NEVER HAVE TO CUT BACK CHANNELS BY REMOVING ANY OF THEM, HAVE YOU EVER WONDERED WHY HE WOULD HAVE TO REMOVE ANY CHANNELS AT ALL?

Kaufman Bros. analyst Todd Mitchell this morning noted in a research piece that the Sirius and XM satellite distribution platforms are largely duplicative. Mitchell says the Sirius platform is highly specialized for satellite radio, but that the XM platform is “basically relatively generic,” with “Boeing workhorse satellites in very strategic orbits.” Mitchell says the XM satellites could be re-purposed “for any number of things,” including incremental HD capacity for the DISH Network

[Bulldog17]

XM'S MUSIC BEAMING SATELLITES WILL BE SOLD TO ECHOSTAR 4 minutes ago

THIS IS WHY WE HAVE THE SAME MUSIC LINE-UP FOR BOTH COMPANIES NOW. DAMN IM GOOD.


Full details on XM's birds:



XM provides digital programming directly from two high-powered satellites in geostationary orbit above the equator: XM Rhythm at 115° west longitude and XM Blues at 85° west longitude in addition to a network of ground-based repeaters. The combination of two satellites and a ground-based repeater network is designed to provide gap-free coverage anywhere within the continental U.S., the southern tip of Alaska, and in the southern part of Canada. The signal can also be received in the Caribbean Islands and most of Mexico (reports have stated that areas north of Acapulco are able to receive a steady signal[15]), however XM is not yet licensed for reception by paid subscribers living in these areas.
The original satellites, XM-1 ("Rock") and XM-2 ("Roll") suffer from a generic design fault on the Boeing 702 series of satellites (fogging of the solar panels), which means that their lifetimes will be shortened to approximately six years instead of the design goal of 15 years.[16][17] To compensate for this flaw, XM-3 ("Rhythm") was launched ahead of its planned schedule on February 28, 2005 and moved into XM-1's previous location of 85° WL. XM-1 was then moved to be co-located with XM-2 at 115° WL, where each satellite operated only one transponder (thus broadcasting half the bandwidth each) to conserve energy and cut the power consumption in half while XM-4 ("Blues") was readied for launch. Subsequently, XM launched ground-spare XM-4 ("Blues") ahead of schedule on October 30, 2006 into the 115° WL location to complete the satellite replacement program. On December 15, 2006 XM-1 was then powered down and drifted back to its original location at 85° WL, where it will remain as a backup to XM-3. XM-2 as well was powered down and remains as a backup to XM-4. This makes the current active satellites as XM-3 "Rhythm" and XM-4 "Blues" with two in-orbit spares.[6][18]