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  1. homer985 is offline
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    07-28-2008, 07:30 PM #11
    Quote Originally Posted by john View Post
    With the credit market the way it is, it is not a bad way to get the deal and the rest of the financing done. I guess some would rather have an out of control interest rate to pay on 500 million. I find it a good way to lower the dept and keep the cost down. Who likes paying that much interest.
    That was kinda my point in the other thread... they're already paying a 13% coupon on the new $700 million; plus a 10% coupon on the older $400 million... adding this $550 million to buyout the rest of the debt and the transponders on XM-4, would likely have a very high coupon too -- since these new notes will be subordinate to everything else.

    By doing the share loaning agreement, it allows the buyers to hedge immediately -- thereby, they probably got a better coupon... we'll know soon enough.

    It's interesting though, reading the news stories -- they're all wrong. For example...

    Carl Gutierrez at Forbes says that Sirius did a stock offering and sale to raise $375 million... and they even got Frederick Moran at the Stanford Group to say that it was a great way "to give Sirius some financial flexibility"! Really Fred??? Did you read the press release?
    http://www.forbes.com/2008/07/28/sir...rtner=yahootix

    Bob Holmes at the Street took the idiocy a step further to say that "Sirius will sell..." to raise the $375 million. Um Bob, no they're not.
    http://www.thestreet.com/story/10430...ns-update.html

    Do any of these guys actually ever read the SEC filings any more? Or pick up the phone to call the companies to ask them what this means? These are the top 2 stories right now for BOTH companies... and the facts in them are DEAD WRONG!

    Tyler... there's your new headline for the blog. Somebody should write up a commentary about the state of financial reporting -- or at least how blatantly wrong these stories are.

    Make sure to email Carl and Bob links to it so they can see their screwups... Carl's email is: cgutierrez@forbes.net and Bob's is: twocents@thestreet.com


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    Last edited by homer985; 07-28-2008 at 07:33 PM.

  2. Newman is offline
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    07-28-2008, 07:43 PM #12
    My sentiments exactly john.

    If you are going into margin to purchase a speculative stock, you deserve everything you get. Sorry. Especially a stock like Sirius/XM. PLEASE.

    The reason that the stock price dropped today is because of the fact that Sirius DID put out all of those shares. What is not being communicated well anywhere except for here, is that those shares are WILL NOT DILUTE shareholder equity. But, MorganStanley and UBS sharted shorting those 375 million shares as soon as they got the, and that is what drove the price down. Yes, it sucks on a day that we should have seen a pop, but I would much rather have this happen and get the merger done, than finalize the merger and get those people with convertible debt come back and make XM pay up 550 million in cash that they do not have.

    The numbers out from Sirius and XM are looking good, and Mel will slash costs when the companies finally merge. Remember Mel's M.O.: Under Promise and Over Deliver. You think the combined company will only have 400 mil FCF next year? You have to be nuts.

    Remember what Cramer says:
    Bulls make money (Long term investors)
    Bears make money (The long-term shorts)
    Pigs get slaughtered (Those in just for the merger spec, and using margin! OMG!)

  3. Newman is offline
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    07-28-2008, 07:46 PM #13
    OMG Homer you are so right.

    Get a load of this article from SmartMoney (Smart? I don't think so)

    The inaccuracies in all of the reporting today and over the past few weeks/months in regards to this merger are rediculous. I am wandering if these people are really that stupid, or if it is an NAB ploy. With Sirius/XM, I do not rule out anything, even Hartlieb's ideas.

  4. homer985 is offline
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    07-28-2008, 07:50 PM #14
    FINALLY! An article from someone that gets it... all explained out in the DowJones article from a bit ago...

    New Stock From Sirius Paves Way For XM's Financing
    By Nat Worden
    Of DOW JONES NEWSWIRES


    A fresh offering of $440 million in stock announced by Sirius Satellite Radio Inc. (SIRI) on Monday raised eyebrows on Wall Street as the potential for share dilution at the company continues to be a chief concern for investors.

    The latest offering, however, is aimed at helping XM Satellite Radio Holdings Inc. (XMSR) refinance its debt to meet change-in-control provisions under difficult credit conditions, as the two satellite radio providers move toward their long-awaited merger.

    Sirius is letting the underwriters of a new $550 million bond offering from XM borrow its shares so that its satellite radio counterpart can refinance on terms that won't saddle the combined company with crushing borrowing costs after the deal is complete.

    Shares of Sirius, meanwhile, fell 16% Monday to $1.88 as the company also reported second-quarter results, which included disappointing subscriber growth numbers. The deal - in which Sirius would swap 4.6 shares for each XM share - now values XM at $8.65 a share, 5.9% above that stock's closing price, which dropped 12% Monday.

    XM's latest debt offering, which comes after it raised roughly $700 million in a deal that priced at a 16% yield last week, took the form of exchangeable bonds that can be converted into shares of Sirius at a certain price after the merger like a traditional convertible debt offering. This arrangement is aimed at allowing XM to refinance at more favorable terms but will be dilutive Sirius' shareholders after the merger.

    Meanwhile, the demand for such an offering in the credit markets comes largely from hedge funds that can set up an arbitrage trade by buying the convertible bonds and shorting a certain amount of Sirius shares to hedge their position. Sirius shares, though, are listed on the Nasdaq's so-called threshold list due to heavy short interest in the stock, representing 12% of the stock's float. That makes it virtually impossible to borrow the shares in order to sell them short because regulators are cracking down on an abusive practice called naked short-selling, where traders make short bets in a stock where there are no shares available to borrow.

    "The demand by hedge funds that dominate the convertible arbitrage market will be very little unless there are shares of Sirius available to be borrowed and sold short in order to hedge the long convertible position," says Michael Knox, the founder of Xtract Research and a former convertible bond fund manager. "If they didn't lend these shares, there would be no demand by hedge funds and therefore the pricing would be a lot less attractive to the company."

    Sirius will lend out the shares to affiliates of Morgan Stanley & Co. (MS) and UBS Investment Bank, underwriters of XM's latest refinancing deal, in return for a fee. The company said the offering won't be dilutive to shareholders in the long term because they have to be returned to the company when the bonds mature in 2014. Also, for any shares that are sold short, the banks will take a long position in Sirius to offset it.

    Sirius said that $375 million of the shares will be sold in a fixed-price public offering, and a remaining $65 million will be sold from time to time at prevailing market or negotiated prices.

    "It's not uncommon in difficult-to-borrow situations for a company to take this approach," says Knox. "They're not technically issuing any shares here, so it's not truly dilutive, but it's giving hedge funds the ability to short the stock where they couldn't short before."

    Sirius also said Monday that it expects to narrow its adjusted loss from operations for the second quarter to $24 million from last year's $79 million. It added that it expects revenue for the period up 25% to $283 million, meeting expectations on Wall Street.

    Subscriber growth at Sirius for the quarter was up 25% to 8.92 million, a gain that Morgan Joseph analyst David Kestenbaum said was disappointing. The analyst last week downgraded Sirius to hold from buy.

    "We believe integrating the two companies would be a major challenge in a healthy economy," says Kestenbaum. "Therefore, we are increasingly concerned that the company might have been too aggressive with its 2009 [outlook], especially in light of the continued weakness in the auto market, which both players are becoming increasingly dependent upon."

    While the equity offering from Sirius may not dilute the company's shareholders over time, XM's convertible offering threatens to do so as holders convert their bonds into shares of Sirius. Citigroup analyst Tony Wible estimates total share dilution from the deal could amount to 4% to 7%.

    Nevertheless, Wible holds a buy rating on Sirius with a price target of $6.50 based on the potential for cost savings after the merger from synergies between the two companies.

    He said the satellite radio's equity offering is "an innovative way to deal with a tough credit market."

    - By Nat Worden, Dow Jones Newswires; 201-938-5216; nat.worden@dowjones.com

    Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/al?rnd=eBc...I2v4M5ww%3D%3D. You can use this link on the day this article is published and the following day.



    > Dow Jones Newswires
    -

    Funny... I figured out 90% of the details in this article and posted them at 1PM this afternoon on this and a couple other boards -- and I'm not even an analyst or Wall St. writer... what excuse does Bob Holmes have?


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    Last edited by homer985; 07-28-2008 at 07:53 PM.

  5. john is offline
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    07-28-2008, 08:02 PM #15
    Well homer, I know better then do disagree with you, especially when you make as mush sense as you do here, so I wont.

    Newman, I find it funny also. How many people are taking it the wrong way. I, like homer am not an analyst, hell I would not even put myself in homers or your catagory but I got it. I just cant wait for this thing to be over so both can get back to business.

  6. homer985 is offline
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    07-28-2008, 08:03 PM #16
    Also, for any shares that are sold short, the banks will take a long position in Sirius to offset it.
    Here's the part I missed... I saw it, but it just didn't click...

    So the underwriters/banks (UBS and Morgan Stanley) are taking possession of the loaned shares from Sirius (for a fee) -- and they're buying an equivolent number of their own LONG shares on the open market too. But then the banks will lend the Sirius loaned shares out to the interested hedge funds, who will buy the debt and short the shares.

    The hedge funds buy the Notes from Sirius, but then hedge the investment by shorting against them... and of course, that short is on margin, so the banks get a fee from the hedge funds.

    It's a win-win situation for the hedge funds and underwriters.

    ~~~~~~~~~

    Also interesting here... UBS and Morgan Stanley will be taking "long positions" in Sirius, as part of this deal. Hmmm, how low will they let this go before UBS/Morgan Stanley decide to start taking their long position??? Seems to me, the lower it goes before they buy 150+ million shares, the better off they'll be...

    You see, the hedge funds are going to short $375 million worth of Sirius -- if those shares price at $2/each... that is 187 million shares. Which the banks agreed to buying an equivolent amount of. Wouldn't it make sense for the banks to start buying at $1.75 and below?

    187 million shares at $1.75, is a hell of a lot cheaper than buying them above $2.

    ...the rich get richer, the fat get fatter... the poor retail investors get their ass handed to them.


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    Last edited by homer985; 07-28-2008 at 08:09 PM.

  7. Newman is offline
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    07-28-2008, 08:21 PM #17
    Homer, I may be wrong, but the way that I understood that line was that once the merger is complete, the convertables switch over to Sirius stock, which would then be considered the "long position" of an equal number of shares.

    Is there somethign else Im missing?

    @ john: I would not put myself in Homer's class. I would not put myself in Tyler's or Brandon's class. I am a self-uneducated investor who has lost more money than he has made in investing, but only because of my XMSR and SIRI positions. (my own investing, that is. Im smart enough to let someone else handle my 401k and retirement stuff). I have a stocks that I have done very well with, and some that I have not done so well with, but I still have trouble reading these press releases, let alone the damn 10k/10Qs. That is why I value the insights of people like Tyler, Brandon, and Homer and don't go over to the Yahoo/Google boards.

  8. john is offline
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    07-28-2008, 08:24 PM #18
    homer, the retail investor does not lose a penny unless they are in the margin or stupid and sell. If they are that is their own fault noone elses. I have told people time and time again, if you dont sell you have not lost anything, same gos for the gains.

    I am not sorry, if that sounds mean to people. I have always called them, as I see them. My wife knows, if I tell her she looks like crap in that outfit. She knows to be thankful, because she did not go out in public, looking like crap.

  9. john is offline
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    07-28-2008, 08:35 PM #19
    Newman, the boards are coming here.

    Also did you see my take of those concessions? If so do you see why I was totally against the HD thing even being mentioned. That would have been worse then all the other concessions combined. I also did not think Mel would even take a chance of, HD Ibiqiuty taking whatever was given.

  10. Newman is offline
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    07-28-2008, 08:43 PM #20
    Yes, I saw that and I do agree with you.

    The article I had written was simply a "what if Addelstien and Tate are not satisifed by what has been given up already..." scenario.

    BTW john and Homer... Forbes actually posted my comment to Gutierrez's article... LOL I didnt think it would get past. Check it out. (oh, and thanks for the information to use in the comment homer! LOL)
    Last edited by Newman; 07-28-2008 at 08:44 PM. Reason: Missed a braket on the link... sorry.

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