XM Satellite radio filed an 8K with the SEC today relating to Major League Baseball and other financing matters. In the filing XM stated that they have escrowed $120 million for MLB, as well as a disclosure that they intend to begin to use the GM credit facility in June of this year.
THE XM 8K
As previously disclosed, our multi-year agreement with Major League Baseball (MLB) requires us to maintain $120 million in escrow for the benefit of MLB or furnish other credit support in such amount. This credit support was previously provided through a surety bond which expires June 30, 2008. On May 16, 2008, we provided $120 million for an escrow arrangement for the benefit of MLB to replace the expiring surety bond. We are continuing to have discussions with MLB about this escrow and related matters and there may be further developments. The escrow funds were from current operating cash and on May 15, 2008, we borrowed the remaining $62.5 million available under our $250 million revolving credit facility with a group of banks. This escrow arrangement, which we intend to replace with a letter of credit, surety bond or other similar arrangement, reduces the company's unrestricted cash liquidity, and could have an adverse effect on our financial position if we are not able to replace the escrow arrangement with a letter of credit, surety bond or other similar arrangement.
Interest under our revolving credit facility is currently 6.00% and is based on the prime rate. All amounts drawn under the facility are due on May 5, 2009 and are secured by a lien on substantially all of our assets. In February 2008, we executed an amendment to the facility to provide that the facility will survive our pending merger with Sirius Satellite Radio. In addition, we expect to execute an amendment to the facility to provide that the $75 million in cash and cash equivalents we are required to maintain at all times is lowered to $50 million for a period of 90 days. We continue to have access to the $150 million credit facility provided by General Motors, which may be used only for payments to GM and which matures in December 2009. We expect to begin utilizing the General Motors credit facility in June 2008.
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.
The foregoing description of the amendment to the credit facility does not purport to be complete, and is qualified in its entirety by reference to the full text of the form of amendment to the credit facility, which is incorporated herein by reference.
Position - Long XM