In a note published today, Goldman Sachs analyst Mark Weinke is not as concerned with debt refinancing, but rather possible dilution that he feels may be in need of later this year. In the note, Weinke states, "Our analysis of projected cash flows concludes both XM & Sirius can get through 2008, but maybe not comfortably, given XM’s funding of the $120 million MLB escrow last night, and pending ’09 maturities."

The analyst feels that there is a tangible chance that the companies will need to raise between $500 million and $1 billion on top of the refinancing of XM's putable debt.

Clearly the possibility exists that the companies will have to raise additional cash. Integrating the merged company will have its challenges, and even with efficiencies made in management, the savings do not happen right away. Whether more readily available synergies such as sales and marketing savings can help weather the storm is not clear. last year Sirius and XM were able to put together decent second halves, and this may enable them to get through without issuance of new shares.

The issue boils down to where and when people see profits and free cash flow for these companies. If additional shares need to be issued, is this the last time that this type of activity is needed. Any analysis requires some speculation. Goldman, who has been bearish is the only analyst thus far to pose a question of a need for additional shares.

for everyone, a major challenge is trying to build models on these companies without any guidance from them. It leaves a lot to the imagination of the analyst, and that makes projections problematic. Should investors be concerned of the possibility of a share dilution? Sure, but they need to understand the assumptions being made that lead down that path.

UPDATE - XM in their latest 8K regarding their MLB escrow has stated that they will not need additional funds and are fully funded.

"As previously disclosed, provided that we meet the revenue, expense and cash flow projections of our current business plan, we expect to be fully funded and not need additional liquidity to continue operations beyond our existing assets, credit facilities and cash generated by operations; our current business plan is based on estimates regarding expected future costs, expected future revenue and assumes the refinancing or renegotiating of certain of our obligations as they become due, including the maturity of our existing credit facilities and $400 million of convertible notes in 2009 and the MLB escrow arrangement. Our costs may exceed or our revenues may fall short of our estimates, our estimates may change, and future developments may affect our estimates. Any of these factors may increase our need for funds, which would require us to seek additional (including replacement) financing, which financing may not be available on favorable terms or at all, to continue implementing our current business plan. In addition, we may seek additional financing, such as the sale of additional equity and debt securities, to undertake initiatives not contemplated by our current business plan or for other business reasons, or seek to refinance or renegotiate certain of our other obligations."

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Position - Long Sirius, Long XM