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  1. #1
    william is offline
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    TheStreet.com

    TheStreet.com

    Friday, September 19, 2008

    Sirius XM Up to Its Ears in Debt

    Robert Holmes!

    (Who is this prick?) <---nothing like beating a dog while it it is down!

    Article full of words like…

    seems….
    if the company…..
    which will likely…..
    In light of the credit markets, refinancing the debt could be difficult or unachievable….
    it may prove to be extremely difficult……

  2. #2
    imromo24 is offline
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    I say its all hype to build up to the surprise of a fantastic refinancing deal...or maybe even a cash payoff....

  3. #3
    Pinball Wizard is offline
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    Quote Originally Posted by william View Post
    Robert Holmes!

    (Who is this prick?)
    Cramer protege & therefore a GS puppet.

  4. #4
    homer985 is offline
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    I found at least 4 blantant factual mistakes made in the article. And I mean blantant mistakes. For example:

    "Shares have closed under $1 for more than a week now, opening the door to the possibility that a Nasdaq delisting notice -- which gives the company three months to shape up or ship out -- could soon follow if the stock were to remain at these levels for another three weeks."

    Emphasis added above... this is wrong. The delisting notice gives them 180 days to meet the requirement... the last I checked, 180 days is 6 months.

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    "Nearly five years ago, Sirius issued $300 million in convertible senior notes that will represent the first milestone debt repayment when they mature in February 2009. The company has given no indication how it will meet that obligation."

    Karmazin stated clearly what the plan was in an open meeting at the ML presentation -- that they planned on getting a bank loan, combined with its own cash to buy back these maturing notes. How can Holmes say that they gave no indication -- when Karmazin stated his exact plan a week earlier? In fact, in the very next paragraph of the article, Holmes states what the plans are for the other two expiring/maturing issues for next year -- taken from the very same presentation that Karmazin said what his plans were for the Feb09 converts. Did Holmes fall asleep during the presentation or what? That is another blantant mistake made.

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    "Although both Sirius and XM functioned historically with negative cash flow, a combined Sirius XM will certainly not have enough money on hand to manage its debt until it has a positive cash flow."

    That's a bit misleading -- Sirius/XM has $442 million in cash available and an additional $150 million, via the untapped XM GM Credit Facility. That is $592 million in liquidity. Do they have enough to buy back the debt next year and operate? Obviously not. But even at their current cash burn, they have more than enough liquidity to service all of their debt and continue operations well past next year. There is just no way that they will burn through nearly $600 million cash in the next year. So buying it back, no... servicing the debt, they have plenty of liquidity to last them until they have positive cashflow.

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    "During a tech conference last week, Karmazin reassured investors that Sirius XM would eventually be free cash flow positive, but he also went as far as to announce he has been in talks with several lenders in hopes of securing a refinancing deal for all of that debt."

    Karmazin stated that the holders of the maturing Feb09 converts want to exchange for a new note. Is Holmes suggesting that Goldman (holder of the largest amountsof these notes) wouldn't want to hold them anymore? Even though there is no exchange of cash necessary, but rather just an exchange of a new indenture? So Holmes is saying that Goldman and the others would rather force Sirius possibly into bankruptcy -- noting that these maturing notes are UNSECURED, rather than exchanging for a new note with a higher coupon and lower exchange rate? (...which ironically is why Karmazin DOESN'T want to do this and would rather find a way to raise the cash to buy back the debt..)

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    "Needless to say, it may prove to be extremely difficult for Sirius XM to secure $1.05 billion to get these repayments financed."

    Again, is he suggesting that the current holders would rather possibly force bankruptcy rather than exchange for a new note -- which would involve no change in cash?

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    "As a standalone company, XM considered itself to be fully funded, but in May it disclosed that it will access a $150 million credit facility provided by General Motors (GM Quote - Cramer on GM - Stock Picks). That credit facility matures at the end of 2009 and can be used only for payments to GM. The company started utilizing the GM credit facility in June, a month before its merger with Sirius."

    While Sirius XM could continue to tap the GM credit facilities into next year, the inability to find additional liquidity remains a long-term issue.


    Of course he didn't follow up this research here to find out that XM paid off the balance of the GM facility by the END of June. There is a ZERO balance on it now. Furthermore, GM is a stategic partner in XM -- and had over $200 million worth of equity in the company -- and has a very profitable installation agreement with XM -- and sits on the Board of the new company... sure the Facility expires in May... but don't kid yourself if you think that it won't be extended. The zero balance is another blantant mistake made.

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    ""Our current simplified forecast has Sirius XM's cash balance excluding any changes in working capital ... could decline to $90 million, which seems awfully low, especially given that we have not factored in any severance payment, merger costs, or banking costs," Horace says."

    Uh Robert... is there a reason you changed this quote??? The exact quote in Businessweek was this...

    "Janco Partners analyst April Horace estimates that Sirius' cash balance could dip to $90 million next year, from $220 million currently."

    Robert, you understand that Sirius had $220 million on THEIR books, plus XM had $220 million on THEIR books, plus XM has the additional $150 million GM facility. Even if Sirius dips down to $90 million, there is still an additional $370 million of liquidity on the XM books. Didn't you research this first? You changed the quote to say Sirius XM could dip down to $90 million -- not Sirius. That is another blantant mistake by you.

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    One dire prospect for shareholders is that Sirius XM will further dilute shares through future public offerings. On the eve of announcing the closing of its merger to XM, Sirius sold nearly $375 million in common stock in a fixed-price public offering, with up to another $65 million more to come later concurrently with a private offering by XM.

    Thus, on a day when investors should have been celebrating the completion of the long-awaited merger, they were instead licking wounds brought on by the share dilution.


    While technically it was an offering with new shares out there -- the offering was NOT a sale of shares by Sirius or XM... it was a placement of shares for UBS and Morgan Stanley to facilitate the placement of convertible notes sold by XM in their mandatory debt refinance to close the merger. Sirius did not dilute to raise cash, the shares were LOANED by Sirius to UBS/Morgan Stanley so that their hedge funds could buy the new convertible notes and short against them. Yes, the shares are out there now -- however Sirius is NOT counting the shares in their calculation of earnings metrics, since the company did not issue them as equity. Furthermore, when the debt is bought back or converted -- the hedge funds MUST deliver them to UBS and Morgan Stanley, who MUST deliver them back to Sirius, who will take them out of the float. This is all well documented. Sirius did not issue shares, nor did they raise $375 million cash in a fixed price "offering". Check your facts... another blantant mistake made.




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    Last edited by homer985; 09-19-2008 at 02:23 PM.

  5. #5
    SiriusXMInvestor is offline
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    I reported and forwared the Holmes article to the SEC and NY AG.

  6. #6
    homer985 is offline
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    While some of what I wrote above is subjective itself -- some of what I responded to is just plain factual. Unfortunately, there is no law against lazy reporting... proving intentional wrongdoing is very difficult to do. You need more than just your word against his... unfortunately.

    You'd be lucky to get the above corrections.


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  7. #7
    J56D is offline
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    Cramers New Mouthpiece???

    Robert Holmes
    TheStreet.com Staff Reporter

    Prior to joining TheStreet.com in October 2003, Robert spent four years with the New England Credit Union Center. Holmes attended Assumption College in Worcester, Mass., graduating with a degree in business management.

  8. #8
    winagain35 is offline
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    What do you guys suppose the purpose of the Holmes article was?
    I mean, there's NO new information, there's nothing timely about it, it's simply a smear piece with twisted facts to bash the stock. I wonder who directed him to write it and why?

  9. #9
    homer985 is offline
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    Well someone is awake over there -- don't know if someone got a hold of them, or if it was my comments about Holmes... but the first mistake (noted above) was quietly corrected. It now says that they have "six months to shape up or ship out".

    Unreal, though I'm surprised that they actually fixed that... so someone is either paying attention to the boards, or their email -- yes, I emailed Holmes about it. But no, I never got a response... just this change.

    I understand some of what I said above is subjective, but still. Did he fix or note the cash drop to $90 million (stated by Horace) is for Sirius alone and not for Sirius/XM? Nope. Did he note that XM paid off the GM credit facility? Nope. All of this info I'm stating is available in Sirius' latest 10-Q filing -- sheesh! It's not like I'm making it up!

    But we know someone is paying attention.


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  10. #10
    john is offline
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    homer985, I agree. I talked about the financing myself in the thread "Why all the frustration" and others. While the terms may not be great for SIRIXM the financing is almost a nonissue, it will get done one way or the other. As you have said most of the rest of the financing is a reissue of the old and not a out right asking for more financing. It would make no sense for anyone holding the converts not reissue them on better terms then before. What would their option be, take the company down and get next to nothing. The answer is clear. Why most cant see it, is frustrating to me.

    The thing that worries me more is this thing about SIRIXM being bought out by some other entity. That would piss me off. Even though I know Mel said that would not happen for some time and not until they are making a profit. I would look at it, like me not getting what I should have been able to get in the long run.
    Last edited by john; 09-21-2008 at 06:20 PM.

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