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  1. Demian is offline
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    10-31-2008, 03:10 AM #1

    The Morgan Stanley debt financing theory...

    I have always suspected that these recent 2 stock for debt exchanges were part of a bigger debt financing deal that will be announced by the Q3 conference call. There is no way that Mel would issue shares for debt, over 3 months early with the share price at this low level, unless it was part of a bigger deal. Why would he do that if it wasn't part of a bigger deal? It seems so obvious - because there really is no other explanation. Someone wanted to exchange the debt for a bunch of cheap shares to either cover a short position and/or go long. SIRI did not have to do that 3 months early and you can expect that SIRI will be getting something out of this -I assume debt financing. Since who the stock for debt exchanges were made with aren't made public, you are left to speculate. Morgan Stanley comes to mind...

    Here is a post I copied from the Yahoo MB that speaks of this theory...


    Morgan Stanley to the Rescue? 30-Oct-08 05:13 am
    Morgan Stanley facilitated the buying of the 2 1/2% notes due Feb. 2009. The original purchase was for $250 million. Morgan Stanley exercised an option to buy an additional $50 million which made the total purchase of the 2 1/2% notes $300 million. After the purchase of the notes, Morgan Stanley sold off a large majority of them . . . about $250 million worth . . . to various parties, including Goldman Sachs. It has been published and theorized that Goldman may hold as much as $130 million of these notes currently (they held nowhere near that much at the time of the resale of these notes by Morgan Stanley). "As it turns out, Goldman Sachs owns nearly 130 million dollars worth of those February 2009 convertibles that Jim references in most of his Sirius XM “bashing sessions.” source: Sirius XM Cramer Wars, Aug. 22, 2008, Brandon Mathhews.

    Enter Goldman Sachs analyst (aka, stooge), Mark Wienkes. My boy here, Mr. Wienkes, has been cutting his target price for Sirius XM relentlessly. In current months his target price has gone from $1 to 50 cents to 25 cents per share. Now, assuming Goldman does own all these converts, and assuming Sirius is in no shape to buy back the converts, it is in Goldman's best interest to convert at the lowest price possible and go long. Manipulation of a stock price at its finest, some may argue.

    But wait, Sirius has been converting this note early for some reason, at a possible bottom of a Bear market even. Why rush to convert when February is still three months away? That is question #1. Question #2 is: Why convert exactly $50 million dollars . . . nearly exactly what the Morgan Stanley slice of the convert may be?

    If I was to speculate best case scenario it would be: Sirius has reached a deal in principle with the Morgan Stanley group to refinance about $250 million of the $300 million convert due in February. Prior to that event, Sirius has agreed to convert the existing portion of the convert owned by Morgan Stanley at the lowest price possible. Morgan Stanley, knowing the current Sirius shares are held down by debt worries, stands to make a fortune from the convert once this (possible) news goes public. In the process, Goldman Sachs and stooge, Mark Wienkes, bite the big one.

    If I was to speculate worst case scenario: The $50 million that's been converted right now will soon turn into $300 million.

    We shall see how it all plays out.



    .....and here is a post from Homer on the Yahoo MB about this theory.


    >>>They don't automatically convert at any price... that's not how it works.

    Exactly. And FWIW, I speculated at length about this GS topic a few weeks ago over on Siriusbuzz -- and pointed out that they held $130 million of the 2.5% Notes. This figure is taken directly from the last 13F filing by Goldman.

    When you combine the high ownership % of these Bonds that they hold -- with Karmazin's comments from last month... that the holders of these bonds want to refinance them into new convertible bonds... and finally add in the constant bashing by Wanker -- I mean Weinkes... it raises a lot of questions in my head.

    Regardless, I won't say that their done exchanging equity in lieu of these bonds any more -- but I too believe that Morgan Stanley will be involved here. I speculated about this too. The fact is, MS has been XM's primary banker for awhile; advised them on the merger; and was a major part of XM's expiring bank loans next year -- and issuer in XM's 7% exchangeable bonds from early August.

    I believe that MS will be involved somehow in any refinancing of the Feb Notes. Whether it's $100 million or $250 million, I believe they'll be involved.

    I also think that the holders of the 2.5% bonds that Sirius exchanged for equity -- may be using those new shares to close short positions that they may have taken. But that is a whole nother topic.

    Nonetheless, I see Goldman as scumbags in this and think the whole deal with them smells...

    Here is another post from the first poster.......


    Morgan Stanley offered the previous loan below knowing the 2 1/2% converts were coming due about 1 1/2 years later. Why not protect an existing $250 million loan that doesn't mature until 4 years from now by wiping out the 2 1/2% converts with another $250 mil loan? Along the way, Sirius pays a nice interest on Morgan's money, Morgan Stanley gets converted at a low price on their share of the 2 1/2% converts, and the Sirius float only suffers a 4% dilution? Sounds like a win-win to me.



    Morgan Stanley Commits $250 Million Term Loan to SIRIUS

    Tuesday, June 5th, 2007

    NEW YORK, June 5, 2007 — SIRIUS Satellite Radio (SIRI) today announced that it has obtained a $250 million senior secured term loan commitment from Morgan Stanley Senior Funding, Inc.

    The facility will mature in five and one-half years and have covenants substantially similar to those under the Company’s existing 9 5/8% Senior Notes. The proceeds will be used for general corporate purposes. Morgan Stanley is acting as the sole lead arranger and has committed to provide the entire principal amount of the facility, subject to customary closing conditions.

    “This transaction takes advantage of favorable market conditions and significantly strengthens our balance sheet,” said David Frear, EVP and CFO of SIRIUS.

    I think that the MS theory is the most likely and I think we will know more in a few days on the Q3 CC.......
    Last edited by Demian; 10-31-2008 at 03:16 AM.

  2. Myinvestors is offline
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    11-05-2008, 08:59 AM #2
    Very Nice information on Morgan Stanley debt financing theory, I am looking forward to hear more from you.

  3. Demian is offline
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    11-05-2008, 07:04 PM #3
    The fact remains that whatever institution loads up on the stock and then loans them the money will make a killing on SIRI. It's just too easy of a way to make a fortune.....

    I think it might be Morgan Stanley....

  4. Demian is offline
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    11-07-2008, 11:25 PM #4
    I anticipate that we may know more about this on monday. Announcing the financing on the CC should dampen any bad Q3 numbers...