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Thread: Sirius/XM debt document...confidential?

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  1. #1
    Demian is offline
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    Sirius/XM debt document...confidential?

    I found this Sirius/XM document on the internet with debt structure information. It says at the top - "Offering memorandum - Strictly confidential"...

    There is a debt structure chart on page 10...

    Is there any new info here?

    http://www.morganstanleyindividual.c...?DocID=p_SIRI1

  2. #2
    Mario is offline
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    This is a nice document... everything is clearly stated.

    Ok, so the 300 million notes due in Feb 2009 are only at 2 1/2 percent... This seems very low.. Does anyone know why they are so low?

    In my opinion, it looks like the company should easily be able to refinance... I honestly don't know what the big fuss is about. The bond market is a huge market, so why can't Sirius just float out 300 million in callable junk bonds at 12% and that's it? I think there would be more than enough people (individual investors and institutions) who would pick up the bonds. And when the crisis is over, they can call them in at 15% over par and refinance on better terms. Sure, it's not ideal but it works.

    What is the problem with this? Please tell me if you disagree? Junk bonds are in the gutter now too, I know, but there is still capital available, and in a recession, a lot of the times junk bonds (bonds in general) are looked upon more favorably.

  3. #3
    Newman is offline
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    I am sure they could do that... they could also exchange the current bonds for new convertibles...

    The problem is, anything they exchange these bonds for will probably be more expensive than the 2.5% coupon that they are currently sitting at. Anything more expensive means more revenue lost. The fact of the matter is that I really thing the Feb 300 million is going to be paid out in cash and then they will focus on the bank loans due in June/July and the December converts. They will be able to get better financing a little later down the road.

    Mel just needs to TELL US that is what he plans on doing. That would help the stock emensly.

  4. #4
    PMO is offline
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    Megaphone Mel

    Newman,

    I sent a message a week ago to Sirius XM IR stating that I won't put another dime into common unless Mel gets on a megaphone to build confidence. You are dead on regarding him announcing his direction on the Feb debt. It would be very helpful. I want to pull the trigger on enough more shares to get averaged down from where I am, 1.50, to 1.20 or better. Won't do it though and will remain on hold until there is some clarity.

  5. #5
    homer985 is offline
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    FWIW, Karmazin did state what the plan was for the maturing debt next year -- but has been silent since. Which raises the question that the plan isn't working... I understand that, given the current debt market.

    That said, what Mario brings up IS the one of the worst case scenarios -- along with exchanging the maturing converts into new converts... that is the worst case scenario. I do not believe that we have reached that point yet.

    With the FED's buying into the banks and essentially funding them -- I see Sirius still being able to take a $150 million term loan (which is the original plan) and using cash flow from Q4 to buy back the debt in February. Unfortunately, they cannot buy it back UNTIL February. So I am not surprised by the silence -- because there is nothing to do or say until then. Short of Karmazin saying, we got a term loan and will buyback the notes in February... however, that obviously hasn't happened yet. And thanks to Goldman Sachs for F'ing it up and making it difficult for them to do anyhow.

    It's a tough position for them to be in -- and I just don't see them in a position to say much... or at least until they secure a term loan... and/or give in to Goldman's requests for a new convert. Then refinance them in a couple years.



    -------

  6. #6
    Demian is offline
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    Homer,

    I always appreciate your commentary... Was there anything new in that document? Why does it say "strictly confidential" at the top? What is confidential about it?

    I agree with you that there is not much Mel can say until he either secures some financing (better to wait in this environment) or feels financially secure enough to say that they would pay for it in cash. Anything Mel would say in this recent environment might not have the most bang either, but maybe it would catch the shorts off guard? Why can't they pay it off early? They could set the money aside or put it in escrow or something?

    You are right in pointing out that Mel has already stated what the plan was for the Feb '09 debt. People complain about his silence, but what else is there for him to say? Why borrow money in this ugly environment when you don't need it for months? I think the money they generate from the best of packages (and the way they did it by renewing contracts) along with the new retail radio and package offerings will put them in a strong financial position to face the '09 debt. The only thing Mel could say was that they had tons of people sign up for "best of" packages which puts them in a position to pay off the Feb '09 debt in cash......

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