Sirius XM Bankruptcy May Be Good For Shareholders
When might chapter 11 be good for holders of common stock? Quite possibly when it involves Sirius XM Radio. I’ll be honest, the reports of a potential bankruptcy filing had left me feeling baffled to say the least. It wasn’t until I listened to Tyler’s Take on SiriusBuzz radio and had an online meeting with Newman, this article’s co-author, that revelations began to unfold in front of us. Newman had made the suggestion that perhaps the recently leaked bankruptcy filing by Sirius XM involved only XM Satellite Holdings, rather than the parent company of Sirius XM. A simple Google search on the topic revealed hundreds of such cases. As a team, we decided to investigate the possibility a bit further and a hypothesis began to develop.
In this filing with the SEC, the corporate structure of the newly formed Sirius XM makes clear that the debt of XM was to remain the responsibility of the subsidiary corporation of XM Satellite Holdings Inc. (page s-9)
“What if,” we asked ourselves, Sirius XM now has the technology to broadcast both services over the Sirius network alone. This patent, issued in April 2008 demonstrates that the company has the technology to broadcast dual services. Although the patent addresses commercial vs. non-commercial, the technology could easily be adapted to broadcast separate services over different bandwidths, a technology similar to HD radio technology. This could explain Sirius XM’s recent channel consolidations as well.
According to Todd Mitchell of Kaufman Brothers, Ergen may simply be after XM’s satellites. XM currently has 4 satellites in the air, along with a spare on the ground. With an average price of about 500-750 million each, XM could potentially bring in 2.5 billion dollars.
As we considered the potential further, several other questions began to arise. We considered which company held which licenses. The FCC’s approval of the merger granted the transfer of Xm’s license to Sirius XM Radio.
We considered the contracts held by XM with GM, Honda and MLB. Mel Karmazin had stated that he had held talks with all of XM’s partners, many of whom now sit on the merged company’s board of directors. Under Chapter 11, these contracts could potentially be reworked to be more cost friendly to Sirius XM. It would also be in GM’s and Honda’s best interests to do their negotiating with the current board of directors who have both of their interests in mind (after all, they are ON that board of directors) rather than a board of directors selected by Ergen, or worse yet, a judge with no business experience. It would stand to reason that the OEMs would want the factory installed XM radios to continue working.
Yet another potential clue can be found by subscribers who have been inundated with channel updates, which could in fact be firmware updates to enable the receivers of both companies to work off of the same basic system.
All of this means of course, that if in fact Sirius XM can now provide both services over the Sirius network alone, that the XM Satellites and repeater network are now a disposable asset. As most of the companies 2009 debt obligations are backed by these same XM assets, the company would be wise to use these as a means of ridding itself on the huge debt burden placed on it since the merger with XM. By simply putting XM holdings into chapter 11, Sirius will in fact eliminate 2/3 of its outstanding debt. It would accomplish this, and save its investors as well. Sirius XM currently has about $3.2 billion dollars in debt. Out of that debt, Sirius owns about $1.1 billion and XM owns the other $2.1 billion. The only debt that Sirius has due this year is the $174 million payment coming due next week. The rest of the $783 million is all XM’s.
The bottom line may be that Sirius will have acquired all of XM’s subscribers with the merger, and none of its debt.
Position: Long Sirius XM
WOW!! Great work guys!!! Sounds logical, maybe you guys should call Mel to make sure he knows about this!!! LOL
I hope you guys are right!!!! Good work!!!
Thank you, Pawi
Very Interesting.
The ironic part is that the XM system and repeaters offer subscribers a better experience than the Sirius satellite infrastructure.
Far fewer drop outs and a portable unit that is an order of magnitude better than the Sirius Stiletto.
I am not a shareholder but I am ready to file a class action lawsuit with you guys, if indeed Sirius declares BK, lol.
very interesting–i thought this 174 million due next week is also XM debt as sirius had none due until 2010–
Plus, is there a 30 day grace period with the upcoming due debt?
How about selling the XM repeater towers to Liberty Media and then BK’ing the balance of XM’s debt/assets. That would be pretty slick. There must be a lot going on behind the scenes.
Brandon/Newman . . . interesting thesis backed-up with credible research.
Question: I believe that at some point in the past, homer985 had posted that the XM subsidiary debt had to be guaranteed by the parent (sorry if I am misquoting homer; please correct me if wrong). Did any of the documents reviewed speak to this issue?
Appreciate the work and background research that went into this article . . .
I BELIEVE the only chunk of debt that this applied to was the 550 million or so debt due in 2014. I could be mistaken though.
2) Holdings and each of the domestic subsidiaries of XM that guarantees certain of the indebtedness of XM and of its restricted subsidiaries, including the Discount Notes, the revolving credit facility and the term loan, will guarantee XM’s obligations under the 13% Senior Notes due 2014 and, on a senior subordinated basis, the Notes, in each case, including the payment of principal and interest. The Notes will not be guaranteed by Sirius or any of Sirius’ subsidiaries except, following the merger, by the guarantors.
Would the shares have to be split and then the XM portion go BK? Or, could XM go BK without Sirius losing any shares?
Chris, there ARE no XM shares.
Well, technically there are XM shares, but Sirius (the parent company) owns them all.
Under this line of thinking, Sirius shareholders would lose nothing.
Brandon-
You are either a genius if correct or you need to be put away in a looney bin because this could be your biggest reach to date.
haha.. i was thinking the exact same thing.
It’s gonna be the looney bin… I guarantee ya’
This guy must have lost a fortune on this issue. The Denial is horrific.
I love reading the new articles and theories from you guys. All this speculation is driving me nuts though. Sirius XM’s debut comes due on the 17th. If there is no grace period (As Gary Brought up) then the financing will have to be in place prior to Close of Buisness on February 17th. For this to happen, there probably needs to be some type of deal reached this weekend.
The bottom line is Sirius will probably either be worth 0.00 in the case a complete bankruptcy is declared, or shoot up exponentially on the news of a deal.
One thing I am disappointed in is the number of people I’ve recently seen calling for class action lawsuits. Mel is running this company the best he can, which is probably at a level higher than any of us are capable. In my opinion this nonsense is akin to suing the state when your lottery number doesn’t come up. We all knew the challenges, and I hope Mel can pull the trigger on a deal and reward the people who have been around forever…
jdare77: Why is it that when news like this comes out, people completely forget about actual facts and block out everything except the rumors and what was told to them? In the last week, did anyone come out and say that Sirius had no cash on hand? Of course not. According to the last quarterly report, they had nearly 400 million in cash on hand. That is more than enough to pay off the $175 million and give them until May to make something happen.
Newman . . I believe they had $360mm COH at end of Q3 ($400mm was end of Q2)
Per 11/10/08 guidance, they were projecting PFCF for Q4. If you pro forma Q408 based on full year 09 projection of PFCF of $300mm, you COULD back-into $75mm PFCF for Q4 ($300mm/4)
But cut that in half (bad xmas/auto) and round up to say, $40mm PFCF (just a guess folks, just a guess). That gets us back to $400mm COH at start of 09. ($360mm Q3 + say $40mm PFCF Q408)
However, thought I read somewhere that loan covenants require $200mm cash reserve so that leaves $200mm to take out $175mm balance on Feb converts ($400mm COH – $200mm Reserve by Covenant)
That implies a $25mm margin of error ($200mm COH accessible – $175mm bal due 2/17) before tapping other sources so it is POSSIBLE that the COH situation may not be sufficient to take out the Feb balance.
But who really knows?
Correct me if I’m wrong on the loan covenants!
When researching this article last night, I did see a COH requirement that was reworked for the merger. I believe it reduced the COH requirement to either 50 or 75 million. I will try to find the link and repost.
I was under the impression that XM radios can only receive from XM satellites and sirius radios can only receive from sirius satellites. And that this is a HARDWARE issue. That’s why we’re just starting to see radios come on the market that can receive from both XM and sirius…they had to specifically design the radios with a different hardware platform.
The theory suggested in this article assumes that XM radios will somehow be able to receive from sirius satellites. I don’t believe this is technically possible. That patent does not address this issue. Time to do some more research. Would be interesting if they could make XM receivers receive from sirius sats with a firmware upgrade….
XM radios are already receiving Sirius content. They are simulcasting all the decades channels and many other channels including Mad Dog, Howard Stern, etc.
The issue is banwidth for all music, sports, news together on one set of satellites. Look how many channels MLB & other sports takes up on XM receivers & if you notice, Sirius has a mish mash of channels that take the NFL & NBA games.
I think they would somehow need to squeeze about another 30 channels into Sirius satellites to handle all sports programming, but 1st must cut a deal with certain content that is still exclusive to XM, as in MLB.
Yes, XM radios are receiving Sirius CONTENT. Emphasis on CONTENT. Mind you, the XM radios receive this CONTENT from XM satellites. In other words, the sirius CONTENT is mirrored on both XM and sirius sats. Get rid of the XM satellites and the XM radios receive nothing! So for this to work, every XM radio would need to be replaced with a sirius radio. Lots of $$$ and time to get that done.
Heath:
The satellite that the signal goes through does not matter, as long as it has the capability of transmitting the right frequency. The satellite does not do anything except bounce the signal, just like a terrestrial radio tower acts as a repeater.
Brandon and I are not saying that radios are now interopperable, simply that one set of satellites can broadcast both (seperate) spectrums. The feed itself is still different codecs.
Any idea if this would also allow Sirius to get out of the horrible MLB contract that they inherited from XM?
Great research Guys! Obviously, we hope there are not any non-public provisos which alter the above.
So, if the above is correct, without any potential unknowns that could preclude this, is it possible that a lot of the publicized activities have been staged in advance?
Thanks again for your great efforts. They are greatly appreciated.
I think it deserves a thanks for the guys doing this research and then being kind enough to explain it to the less market experienced amoung us (me). And if something like this is the plan I don’t understand why SiriusXM wouldn’t just put it on the table, why all the highschool games, rumors, and sillyness? Hope you guys are right, if Mel steps down you have my vote to take over the company as a three-way CEO. Ha.
Don’t just sit with your theories———get them to Mel and his Board of Directors.
The interest should be in saving some portion of the corporate SIRI for the stockholders at all levels and for subscribers.
We fought for the merger with our writings now its time for Mel and his Board of Directors to fight and work for all of us.
>>We fought for the merger with our writings now its time for Mel and his Board of Directors to fight and work for all of us.<<
Why do you believe that you “fought for the merger” and are owed something in return? I mean, you based the comments you wrote to the FCC on your ideals and beliefs that the merger was in the best interest of the public? Didn’t you. I mean. You were in effect lobbying for the common good of the United States Citizens? Right? Why do you believe that you are “owed” anything by this company. Unless, of course. The comments you wrote were not what you really believed. Unless, you thought that if you campaigned for a issue that you did not really believe was in the public’s interest, but instead believed that you would gain financially from your actions. Then in effect, You not only lost your money. But you also sold your personal integrity for the “promise’ of a financial reward that Mel made sure would never be paid with the post-merger debt deal.
The important lesson here is. The next time you decide that your “personal integrity” is for sale. At least get the money up front.
Remember, you can always get more money. But, you can never buy back your personal integrity.
And so it goes,
PCSTEL
You boys are on point!…….I hope this concept is not new to the DECISION MAKERS that matters.
¿¿¿¿¿ Hello!! Earth to Authors!! Hello!!!
You guys have “what if’d yourselfs” all the way down to 6 cents.
First of all you say..
“According to Todd Mitchell of Kaufman Brothers, Ergen may simply be after XM’s satellites. XM currently has 4 satellites in the air, along with a spare on the ground. With an average price of about 500-750 million each, XM could potentially bring in 2.5 billion dollars”
Uhhh! I hate to tell you this.. Uhh! But XM/SIRIXM doesn’t OWN XM-4 anymore. They SOLD IT in 2007. SIRIXM leases the capacity on XM-4 from the company that OWNS IT.
XM-1 and XM-2 are basically door mats at this juncture.
So that gives them XM-5 which operates on the S Band. Not Ku.
You can’t sell something you don’t own. But, why mess around with facts when it is much funnier to just continue to “what if” yourselves to ZERO.
Hey, maybe you guys can get the sale of the Brooklyn Bridge into the “what if” scenario also.
And so it goes,
PCSTEL
They bought back the satellite onconsummation of the merger if I’m not mistaken.
Why not do something prudent. How about actually looking at the SEC statements for some FACTS.
I know, I know… Who cares about FACTS when just makin’ up a bunch of stuff is much more fun.
The Authors here appear to have thrown FACTS out the window, and now have turned to just wild speculation.
Hey, I can play this game too.. What if.. I mean.. What if the XM satellites actually have super secket antennas on them that will allow them to operate on Ku band for DBS. Hunh?? Hunh?? Maybe, Could be!!!
Or maybe they have super Sekret spy cameras built in and the DOJ uses them as spy satellites?? Hunh?? Think about it.. No other Govt. would ever think that a Satellite Radio Satellite was a spy satellite?? Oh! That could work.. Now would the DOJ allow that satellite to fall into an uncontrolled entities possession? Of course, not.. So the DOJ will step up and Buy SIRI.
Man, I can send you over to the old Globalstar thread. They concocked up a whole list of “what if’s”.
And so it goes,
PCSTEL
This isn’t a new thing from Brandon. He’s always written his articles this way. He’s the master pumper.
From the Company’s 3Q SEC Report:
XM sold the XM-4 transponders to the Trust owned by Satellite Leasing (702-4) LLC (“Owner Participant”) for $288,500. XM leased the transponders for a term of nine years. These lease payment obligations, which were unconditional and guaranteed by XM Holdings, were senior unsecured obligations and ranked equally in right of payment with existing and future senior unsecured obligations. Under the terms of the lease, XM was obligated to make payments that total $437,400, of which $126,600 was interest, over the nine-year base lease term.
XM was obligated to provide credit support to the Owner Participant. To provide this credit support, XM retired the existing mortgages on its headquarters and data center properties in Washington, D.C. and put into place new mortgages on those properties in favor of the Owner Participant.
XM repurchased the transponders on its XM-4 satellite in connection with the Merger and terminated this sale leaseback arrangement.
Should have been XM-3 instead of XM-5 as the only launched original XM satellite that is not compromised in one form or another.
It’s also been reported in the regular press that echostar/dish may be interested in the orbital slots rather than the birds themselves.
Dude:
The orbital slots are for S Band. Not Ku. There are already satellites in that “slot” that operate on Ku Band. You can literally have dozens of satellites parked in a single “slot”. But, they all have to operate on different frequencies. DBS runs on Ku. The Ku slot is already occupied.
Any interest in the Brooklyn Bridge? I hear “reports” that Echostar is interested in that also.
PCSTEL: Perhaps you should do your own research before ranting about us not doing it.
XM never sold a satellite. They sold a transponder on it, and were leasing it back. As a part of the “toxic financing” done at the end of the merger, they indeed bought that transponder back. So they DO own it, as SXMInvestor stated to you.
As far as wanting satellites, a number of reports have come out declaring that while the Sirius satellites are quite speciallized, the XM satellites are more of the Boeing “workhorse” type satellites which have amuch wider range of uses. This could be infact what these companies are after. You have a greater knowledge? Start your own blog.
Could you please mail your e x c e l l e n t analysis to MEL? Suppose he does not think of this at the right moment?
It would not hurt, would it?
Great job Guys; hope we win!
Orford/UK
Verizon and AT & T may surface in this game as well (WSJ reporting)
The authors here need to display some journalistic integrity here.
>>Yet another potential clue can be found by subscribers who have been inundated with channel updates, which could in fact be firmware updates to enable the receivers of both companies to work off of the same basic system.<<
This is not even a potential clue. This is complete wild arse rumor mongering.
This is not even within the scope of reality. You guys need to understand that people are gonna lose money based on your “outlandish” concepts here. You are doing your readers a HUGE disservice. Do you guys have any form of “editorial review” here?
And so it goes,
PCSTEL
It’s no worse than the complete wild arse rumor mongering going on at the WSJ and the NYT. That’s how we got beaten down to this level.
Hmmm.. Let’s see.. NYT and the WSJ, or some Yahoo that “what if’s” themselves into a huge loss and “what if’s” all their readers down with them??
Maybe, just maybe, you could step back from the Kool-Aid stand and do an assessment of the entire string of “what if’s” that have been addressed here, and the propensity of the validity of their outcomes in the past?
Hmm? Just a concept?
PCSTEL
Let’s just say people sell because you come here with all your pessimism & then there is a deal that Mel cuts for 3X or more the present stock price.
Maybe you are the one that could cause someone to lose alot of $
In my opinion, the only “deal” Mel is going to make is the “deal” that gives Mel a huge ownership interest in a near debt free entity.
Has Mel worked in ANY FORM for the enrichment of his shareholders???
I mean, think about it??
The reports say Charley made an offer for the company in late 2008.
You would think that Mel would have wanted to leak that information to get the stock price moving up and the Shorts leaving so he could sell some shares at a higher price and pay off the debt due in a couple of days. Seems like that would have been in the shareholders best interest? But, did that happen. Nope.. Not a word.
You see. Mel is workin’ for Mel.. Not for the companies shareholders
You guys need to sit down and examine that FACTS here.
And so it goes,
PCSTEL
Mel is doing the readers of this site a huge disservice, he has said NOTHING. I think it is clear that the author of this article paints a clear picture that he is speculating.
If that point is “rumor mongering” then you should be able to tell me why I am seeing back to back updates multiple times per week?
See my post above. It hard to speculate about a company wanting to buy another company to acquire certain assets. In this case satellites, when in FACT. The company doesn’t even OWN some of the assets anymore. But, simply leases the capacity on the satellites.
Dude, that is not even speculation. That is someone that doesn’t have a complete command of the facts.
The author writes complete speculation that can not even be backed up with any form of factual data which leads the reader to think that the CEO of the company is looking out for their best interests. When, as you yourself have pointed out the reality that the CEO has never done anything to promote the welfare of it’s shareholders.
Even Cramer realized some time ago that Mel sold the shareholders down the river post-merger. He told you guys the TRUTH. You didn’t want to believe him, and called him a traitor because he changed his viewpoint after the CEO screwed the shareholders.
That’s called investing friends. You gotta’ back away from the Kool-Aid and re-evaluate your investments when things change.
My opinion is. Mel is has not, and does not have shareholders best interests in mind. Anyone that “what if’s” a scenario (which lacks any factual data) which paints the possibility that Mel does have their (the shareholders) best interests in mind, is not acting in the best interests of their readers.
And so it goes,
PCSTEL
And so it goes,
PCSTEL
Steve,
Can you answer the above question? What are all of the updates about?
Also, what brokerage company do you work for out of CA? You seem to have quite an agenda.
You obviously have not read the SEC, 3Q, or else you would know that Newman and SXMinvestor’s comments above pertaining the buy back of the XM-4 transponders. Of course the rest is speculation, that’s what we do with so little real info available.
Also, do you think there is any possibility that XM could file for Chapter 11 without getting the parent company involved?
PCSTEL…GO AWAY BASHER …YOU EITHER LOST A LOT OF MONEY OR A PATHETIC SHORT…
Lets remember this was mentioned before on Tylers radio show. The possiblity of only letting XMSR go bankrupt because most of the debt was theirs anyway.
U Guys have to be kidding! Now u guys are making me feel this site is a damn scam! Fairy tales!
Has anyone ever thought that if this was possible institutions, and people who have a clue about corporate law would be buying the hell out of this thing and it would be trading in the 6’s! R u all nuts or what?
This might get the company out of the very expensive GM deal as well. Maybe they can pull this off; wish I were a fly on the wall in the meeting rooms where this is going down.
Somebody is betting big because I am seeing 1 million share buys at .07
For every buy there is a sell. Understand?
This sound similar to this article I read from your website.
https://siriusbuzz.com/big-announcment-possible-monday-922.php
SXMINVESTOR, It’s sad but that’s only a 70k investment. I own 18000k shares and almost as much invested! This is very sad but I’m not about to become so desperate that I would believe this article. Your smarter then this. I read your postings all the time and realize that most of these people getting excited about this are comletely DESPARATE! Sorr but it’s reality.
This article seems well researched and thought out. Thanks for the solid effort. I’ve about had it with siri….love the product but despise the investment. For a guy who is down a bundle on this stock i’d love to see Mel do something that would benefit the shareholders. I hope you’re right!!!!
Read this link posted by homer on yahoo board very interesting.
http://messages.finance.yahoo......#038;off=1
And the one under it from the msg board
Why does every article coming out say no matter what happens–bankruptcy, deal with Ergen, deal with Malone–the common stock is worthless? Everyone talks (including Cramer now) like it’s so obvious, so what am I missing? Does a deal not help us?
And on a side note, PCSTEL, quit with the “And so it goes” crap…you blatantly stole that from Vonnegut, and it’s driving me crazy.
>>you blatantly stole that from Vonnegut, and it’s driving me crazy.<<
No idea who this “Vonnegut” person is. Maybe they stole if from reading my posts on SillionInvestor. Sorry, I stole it from Linda Ellerbee over two decades ago.
And so it goes,
PCSTEL
So you’re illiterate? That adds so much credibility to your argument.
PCSTEL: Why the hell can’t you come on here and offer your advice w/o throwing a temper-tantrum? Why don’t you take Homer’s lead and actually respond to an article w/o the old tired
“The author isn’t reading the xxxxxxx, only I do, and only my way of interpretting them is right”
You come on here pissing and moaning while throwing out Ku, S band, slots, etc like your a satelite expert. Fine, then how about calm the hell down and make your points like a gentleman? Seems to me you’re the one too emotional about this stock and not looking only at “the facts”.
PCSTEL has long posted good insightful information that doesn’t only include opinions. We should be greatful. Dreamers that often don’t see the potential downside of their actions usually get hurt.
Never on this site calm, never on this site.
We are not dreamers. I understand that the company is in trouble right now. But as was said above, we are trying to look “outside the box” and see other alternatives.
Jump into the message boards and become a part of the community. I respect all views, positive and negative as long as they are presented with facts. We have posted ours in the article, and not ONCE did we mention “sources close to the discussions”!
i believe this is possible…see this article, “Panda Ethanol Subsidiary Files for Bankruptcy”
http://www.sustainablebusiness.....y/id/17549
Thanks zipfly! Hopefully this works for Sirius XM, if necessary.
It’s a tempting theory–particularly because I am long quite a few shares. However, I have to believe that the creditors of Sirius are not going to stand by and watch as XM alone seeks bankruptcy protection. Those creditors would in all likelihood try to force the entire enterprise–Sirius and XM–into bankruptcy–so as to increase the assets available for repayment of their obligations. It would be up to a judge to decide whether your analysis has merit and whether in fact the two entities could be considered separate for purposes of their debt.
Well, f-it, I just sold the majority of my holdings to save the tiny bit I had left. Feels good to finally accept my losses from this addiction…time to move on.
My selling is probably good news for all of you, because now the stock will probably take off. Good luck to all. I’m out.
thanks brad, we will remember your sacrifice. Charles please post a sticky in the stock section “In rememberance of Brad, the man who made us thousands”
lol, i know how ya feel.
I just can’t bring myself to sell knowing all this should be over in 5 days. Either Sirius XM defaults or they pay the debt…only a few days away from losing .07 cents per share….or gaining a substantial amount. Much like you…I feel like if I sell it will gain and if I buy it will tank…
One thing I don’t understand about this scenario. If Sirius/XM goes chap 11 for the XM side of the business , how does the common share holder for the merged co. , not get whacked? There are no more shares of XMSR , they were all converted . How would a XM BK affect the common of the new merged co. Wouldn’t we lose our equity , can some explain how a XM BK doesn’t wipe out SIRI common stock ?
IS THERE A REASON WE NO LONGER SEE ALL OF THE RESPONSES ABOUT THIS REDICULIOUS ARTICLE AND AMATEUR VIEW. U GUYS R PLAYING HOUSE AND U HAVE PEOPLE BELIEVING YOU! NOW YOUR NOT ALLOWING THEM TO VIEW ALL OF THE REPONSES TO THIS GARBAGE SCENARIO! SHAME ON U AGAIN! IF THIS WAS A REMOTE POSSIBILITY DO U THINK THE PPS WOULD BE A NICKLE? OR R U THREE STOOGES SMARTER THEN WALL STREET INSTITUTIONS AND CORPORAT LAWYERS? WHAT A JOKE SIRIUSSBUZZJOKE.COM
What have you offered, well other than a paragraph typed in all CAPS? These guys are trying to think outside of the box. There is a precedent to what they suggest. I doubt this scenario will play out how they have suggested (becasue more companies would set up dummy subsidearies, transfer debt and bankrupt them..presto a debt free company).
If siriusbuzz is simply censoring the tired and repetitive…Sirius is Bankrupt….I’m fine with that, you can read that in every single news article that has been published. I want to see new, fresh ideas of whats going on.
Many companies set up “special purpose” subsidiaries, specifically to handle the business of one “deal”. There are companies that simply create many subsidiaries. A company might, for example be called “Smith Company” and set up several subsidiaries called Smith Inc., Smith LLP, Smith Fund, etc. It happens all the time. Banks do it, etc. So, I don’t think this article is far-fetched at all. Hopefully, Sirius XM and all its entities have been set up legally so there is the possibility of one of them being affected without affecting the parent company. I am not a lawyer, so I can not give any opinion on this (also I do not have enough knowledge to look at their corporate set-up to give an opinion).
Good luck to us all!
Steve,
By saying that it is probably not as easy as it sounds, I did not mean it wasn’t plausible. I think these articles are nice becaue the mainstream news is a simple parrot. Remember when the Parrot Said…
Merger will not happen..Squawk Merger will not happen….
I disagree with anyone who assumes something will happen just becasue the media and wallstreet views a situation in a particular light….
Thanks
click “Older Comments” at the bottom of the page.
Wow, that was easy wasnt it? Not really necessary for an article of all caps posting now, was it?
Newman, do you think the abovementioned scenario is a 3% or better possibility? Be honest
kevin, just hit the older comments selection on the bottom left of the page and you can read all of the older comments. calm down…… they are not censoring you.
and this is why they have an older comments section…. sorry guys
To make a comparison to what Mel is going through, he is like Rocky getting beat from one end of the ring, staggering in the fight against the Russian in Rocky IV, so let’s hope the little scrappy guy can pull it out in the end with shareholders not getting wiped out.
I read that Kraft who runs Direct TV recently bought a good chunk of shares of Sirius, so maybe he will have enough influence that it is a buyout or injection of cash for some type of partnership.
SXMInvestor-
I agree with you. Not only does Mel have to come to these people with requests, but he has to convince them it is in their best interests to be involved in one way or another. Obviously, he must be physically exhausted, but still has to play poker because everyone must be watching him for any indication of weakness or panic. It takes a special person to pull this off. I know I couldn’t do it!
what’s a good chunk? Not a couple of million at 7 cents right?
I wish this had come up with the image. I had thought it would. Those little notations are important. Note 2 states:
2) Holdings and each of the domestic subsidiaries of XM that guarantees certain of the indebtedness of XM and of its restricted subsidiaries, including the Discount Notes, the revolving credit facility and the term loan, will guarantee XM’s obligations under the 13% Senior Notes due 2014 and, on a senior subordinated basis, the Notes, in each case, including the payment of principal and interest. The Notes will not be guaranteed by Sirius or any of Sirius’ subsidiaries except, following the merger, by the guarantors.
Brandon-
Are the words “Holdings” and “guarantors” defined terms in the document (because that would obviously give them specific meanings as defined in that or other legal documents)? Also, the footnote refers specifically to “Domestic XM Subsidiaries.” However, the money due is linked to the two entities (or groups of entities) above. So, who owes what, and can these groups be separated for any purpose?
I just noticed that footnote 2 also refers to XM Satellite Radio Holdings Inc. – my oversight. Still the other questions I have asked apply.
Thanks again!
Thank you!! Brandon/Newman,
This is very interesting, because I have been wondering how we could get rid of the XM/dept albatross. And keep the spectrum in turn.
If Mel can pick out all of the goodies in XM and throw away the bad parts, then this is good. Especially with no liquidity in the credit markets.
Whether or not this is his ace, has yet to be seen. But good work guys!!! Your efforts are appreciated by some of us.
Disclosure: Just sitting in a holding pattern. 😀
what about subscribers?
Soooooo……are my shares of Sirius XM going to make money or not?
Sirius in South Dakota says:
February 12, 2009 at 5:19 pm
“Soooooo……are my shares of Sirius XM going to make money or not?”
Ummm NO!
Where in the hell is Shark? He is a lawyer for Christ Sakes!!
First problem — it is the Sirius debt that is due next week that they need Chapter 11 bankruptcy protection for… not the XM debt.
While I understand what is being discussed, it is not practical in this situation — at least, not at this moment.
The XM debt issues coming up first are the bank debt, which will more than likely be extended. Then after that, the Dec09 maturities are the real issue. However those don’t mature for another 11 months. When you file for Chapter 11, your are asking for bankruptcy protection to help you because you defaulted on loans. Since the XM debt does not mature for 11 months, Sirius will not default on it before then.
The problem is the Sirius debt due next week. Before people bring up the current cash on hand situation — I discussed this at length on Yahoo. When you add the Feb09 debt maturities in with the amounts owed to the NFL, MLB, SS-L (satellite CAPEX) and other current creditors that are in accounts payable – and you’ll see that Sirius does NOT have the working capital to get through the quarter. It is the Sirius debt that is being defaulted.
You cannot default a subsidiary over debt that is backed by the parent company.
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Homer, this seems logical and you seem like your not living in OZ like some of our authors. do you think we will see BK in the coming days? Mel seems to be setting the stage for, “we have exhausted all options including any possible sale or refinancing, therfore, regretably must file for BK protection”
Jdare, we would all like to see “new and fresh ideas” however it would be nice not to have a far fetched fictious scenario thrown at us when the authors insist over and over that SIRI is “highly unlikely to be a BK canidate” I have followed the site for years and appreciate the hard work of all, however, these authors are much smarter then this! So what is the mtive? I no longer know? But it’s begining to sound a little fishy or far fetched.
Second problem… you want to “dispose” of the XM satellites? To do that, Sirius must replace all 10 million of XM’s active receivers. Even at a cheap cost of $50/receiver, who is going to fund this $500 million replacement program? You think the subscribers will? Did you all forget about the Sirius and XM gauarntee (both publically and before Congress) that no receivers will become obsolete? The only way around this is if Sirius replaced the 10 million current active receivers — and the havoc it will play on the other 10 million non-active legacy receivers.
Furthermore, while XM’s debt is secured against XM’s assets under the XM subsidiary — you all should know that XM’s license and satellites and all of its assets fall under the XM subsidiary too. If you put XM into Chapter 11, then all of its assets go in there too — including XM’s subscribers… they are an asset to the company.
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What if you could send the radio in for a chip swap? Could be cheaper.
Finally, let’s say you get around all of the above — you bankrupt XM and liquidate, but somehow manage to keep its subscribers….
Who’s going to buy XM’s licenses, satellites and repeater network? Without any subscribers? Especially when all it can be used for is satellite radio? You can’t just use it for something else… the satellites are specifically designed for the S-Band… even more specifically, 2332.5~2345 MHz. And that portion of the S-Band is only allocated for DARS service. That limits the uses.
Sorry, but I disagree quite a bit with this premise. While I did speculate at one time about bankrupting the subsidiary — it is possible. However it will have detrimental effects on the parent company, as half of the parent companies assets would be frozen in bankruptcy court (actually MORE than half, because of the re-valuation of the XM licenses). It would murder the common holders… not that that hasn’t already happened.
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good stuff homer . . . i feel like all of the remaining oxygen just got sucked out of the room
what a thread killer!
guys, we need a new article quick . . . lol . . . this one is done.
Homer, thanks for the all the information. pretty much covers it, Technology restricted to SDARS, Legacy Receivers not becoming obsolete (that’s why they “simulcast”), and license moving with the BK of the subsidiary not to mention its Sirius’ debt due. So how does this work when Sirius files…… 🙁
Thanks for coming over from the dark side (yahoo) homer…
Perhaps we can discuss this more indepth over in the forums? But as for this post: Both licenses belongs to Sirius, not XM. Secondly, we are talking chapter 11 REORGANIZATION, not chapter 7. Part of that organization may include getting rid of some property, but mostly it is to force reorganization (and postponement) of debt and contracts.
I have more, but I have a meeting to go to. I’ll follow up with you later tonight/tomorrow.
newman, homer truly believes he’s the authority when it comes to SXM but he definitely needs to speak to a securities law attorney to find out more about the corporate structure of the newly merged SXM.
I don’t know whether the company is actually considering this option but I think it’s certainly a viable one. I guess it comes down to screwing the bondholders versus the shareholders and since the shareholders have been screwed big time since the merger I’d say it’s the bondholders’ time. Having said that, this is a very complicated matter and it’ll come down to what SXM’s attorneys think/advise.
>>>SIRIUS XM Stockholder says:
“homer truly believes he’s the authority when it comes to SXM but he definitely needs to speak to a securities law attorney to find out more about the corporate structure of the newly merged SXM.”
~~~~~~~~~~~~~~~~~
Feel free to dis me all you want, but you should do your homework too. Try reading the latest 10Q’s of which subsidiaries own which licenses… it can’t be any more clear.
The Sirius FCC license is held by the “Satellite CD Radio, Inc” subsidiary; and the XM FCC license is held by the “XM Satellite Radio, Inc” subsidiary.
Now run along and look at Brandon’s chart above — look to see where on the depth chart each of those subsidiaries are… you really think you can bankrupt the XM subsidiary, while the XM FCC license is held by that subsidiary — and it won’t get tied up in bankruptcy court?
Try reading the XM 10-Q that was released on November 12, 2008…
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Homer, cos,
Xm could default on the mlB payment due and file chapter 11 now, no?
XM has the cash on hand to make that payment. According to the XM 10-Q, it had $215 million on hand as of 9/30/08.
With positive FCF in Q4 and maintaining a minimum cash balance of $75 million — XM still has the room to do this.
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Xm has 2009 and 2010 in escrow as I understand, renegotiating with them for a lesser amount to escrowed for 2011, could reduce 09 expenses. If they can agree on a plan.
cos, according to the MLB contract, the escrow amounts are for the final 2 years of the contract, which are 2011 and 2012… not 2009 and 2010. That NYTimes article was wrong. Don’t know where they got their info from, but I got mine directly from XM’s last 10-K. XM still needs to come up with cash for this and next year.
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I got it from the 10Q and assumed that it was for 2009 and 2010. Do you have another reference that is more specific??
Under XM’s multi-year agreement with MLB for the rights to broadcast MLB games live nationwide and be the Official Satellite Radio provider of MLB, XM is obligated to pay $60 million per year through 2012. In May 2008, XM provided $120 million for an escrow arrangement for the benefit of MLB to replace an expiring surety bond. In connection with funding the MLB escrow arrangement, XM borrowed $62.5 million available under its $250 million revolving credit facility. This MLB escrow arrangement reduces its unrestricted cash liquidity, and could have an adverse effect on its financial position if XM is not able to replace the escrow arrangement with a letter of credit or otherwise.
Also just so I understand and for sd-08’s benefit, the $75M cash minimum balance pertains to their bank lending agreements not the MLB agreement. It can only be lowered with a written agreement from the banks involved with that revolving facility or else the would be in violation (breech, default not sure of legal term) of their agreement.
Cos, this is from XM’s last 10-K:
(page 49)
“The agreement requires us to deposit $120.0 million into escrow, which represents the amounts due for the 2011 and 2012 seasons, or furnish other credit support in such amount.”
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Homer, thanks I was looking for it in their last 10Q. Read the 10K and it is as you say….
Hey everyone……………sort or read your banter while on the road……just got in and I see that we’re back to where we began.
SIRI/XM=May go BK, and despite ‘Newman’ citing a difference between Chap. 7 and Chap. 11, everything I’ve ever read or heard is that it doesn’t matter for the ‘common’ shareholders. We are viewed as expendable it seems…………………..So who cares, unless you’re a founder. And even though, after all the years of sacrifice and investing, we may FEEL like we are founders, the sad reality of it is that WE ARE NOT; that we are but stepping stones on whose blood sweat and tears, professional gamblers, and smooth talking sales folks, the likes of Ergen and Karmazin, seemingly stake their claims to fame and fortune, and somehow ultimately advance the better-ment of the human race, etc, etc, etc. Who one day will be so appreciative to them for the new era ushered in of SATRAD, as Stern so poignantly emphasizes. We and our efforts and monies to HELP GET THE INDUSTRY here, will be less than a passing thought, but to ourselves and doubtless disappointed families………
So unless some 11th hour reprieve occurs that also somehow benevolently spares the throngs of investors both little and large…………………………..I am Fearful for the worst, Sorry.
I believe our only chance is Liberty… and we’ll get diluted big time. But we’ll still have SOME value..
Are you serious ? Dilution is 99% in already with the stock at .075 cents. Any cash infusion will send it soaring huge % on the news.
Sorry Brandon, whether your right or wrong, I can’t get over your headline on this article.
The Headline is Banter for the Illusion.
If this truly beautiful ‘coup d’grace’ was actually possible, it would’ve been known by Wall St. firms from the start of the merger, or so I think.
Who was so blind, and what is Mel, now that he ‘found out’ waiting for??
For more penny-enne shares to buy………..?
Coup d’ grace
As for the speculation of the current cash on hand,,,,,,,,,
I think all of these numbers that are being thrown around are incredibly conservative………
1. Not one mention of what “best of both” may have produced in Q4.
2. Not one mention of what the “lifetime sub” may have produced in Q4 or this current Q1.
3. The savings that may have been produced from synergies could be far more than expected due to the massive lay offs and the station consolidation. (I do admit that the severence pkgs could have been costly)
If you chose to be anything other than conservative, you could make an arguement that they have $750m on hand……………..
Start with $360 million…
+ Add in FCF from Q4 of about $75 million
+ Add in 3 million b of b, ($4.99 x 12 months)= $179 million
+ Add in 2 million lifetime upgrades ( an extra $200 x 2 mil) $400 million
Hell, that equals over $1 BILLION and I think the b of b and lifetime converts are CONSERVATIVE!!!!!!!!!!
Someone explain to me how those numbers are so far off?????????????????
Methinks that corporate malfeasance and greed have probably taken these profits and our investments and distributed them to ‘et al’……………
Your numbers are probably good, but when the Big Three come begging for money from Tarp, and Brokerage Houses distribute big bonuses for top exec’s while also begging for funds from tax payer’s……Who would fault what is starting to look like to me, a Collusion twixt all the satellite ‘Mogul’s’ and our funds.
After all, to the rest of the Nation we have ‘expendable cash’ and I guess we don’t pay taxes either!!!!!
SD –
I have been bringing your points 1 & 2 all day on different posts and you are the first one who is seeing this. I do think the cash level you are speaking of is a little over the top, but 150M net increase is very possible.
Let’s say 5% or 1 million took the best of and paid for the year upfront because that was the deal, so on the somewhat conservative side $150/yr X or 150M upfront. If 20% of the family subs or about 1 million again grandfathered in, that’s another 84M at $7/sub X 12 months.
There’s 184M, but let’s just say it’ ony 3% on the Best of and 10% of the $ price price increase, we’re looking at close to 100M extra cash by now.
I think Sirius could have the $, but just playing all thei options- let’s see tomorrow.
http://www.fool.com/investing/.....hpa0000001
Someone post the latest WSJ article please.
“Sirius XM, Ergen Move Closer…”
Thx
This headline should give the stock some life tomorrow morning, but we need details and will Liberty one up Ergen and offer a decent buyout for shareholders.