Absolute 100% no in the next 3.5 months;
Doubtful for the next 6 months after that (call it 70% no - 30% yes);
Possibly for the next 1-2 months after that (call it 50% yes - 50% no).
Why?
The get through the Feb maturities okay;
They should be able to extend the expirations of the May term loans;
But who knows what's up with the Dec maturities... those concern me.
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homer,
Are you concerned about december because of the state of lending or missing subscriber numbers?
My answer = homers answer.
I think the possibility for BK in the next year is remote.
It is the December debt that worries me, and always will until something gets done about it. At current share prices, they could sell all 4 billion outstanding shares and come up with 400k - BARELY enough to pay off the debt. (Actually, there is 433 billion left, but they still have some cash).
If the credit markets do not start turning by Sept, we may be in for a world of hurt. I have been predicting that the economy will start to shift around March, and the market will realize it by May. If that happens, Sirius is GOLDEN. Even if it happens 3-5 months later than I think, I think we are in good position. If it doesnt happen by September? We may be screwed... But I do not think it is very likely at all.
HOMER: Glad to see you hanging around! Haven't heard from you in a while...
I wanted to ask you a question that I have not been able to get answered anywhere:
Can a company buy back it's own bonds on the open market or is there some sort of regulation there? Can an officer invest in the bonds of it's own company?
Answer in a PM if you feel the need, but I would love an answer.Thanks in advance.
Ditto - I'm glad to see Homer around again too....dude doesn't post enough here.
I also want to know about what Newman asked and if the company is able to buy the bonds in the market, how would one find this out? Are there public filings in regard to that?
I'm not worried about Feb. - cash on hand...
I'm not worried about May - extended...
I'm not worried about Dec. - Mel is going to go to several Cash Americas around the city and get a bunch of pay day loans...
There's nothing to worry about.....ok
Let me expand on this BK talk -- it's not anything that I haven't been vocal about before, but I still want to share my thoughts about this...
Sirius $300 Million in Feb09 Notes:
Back several months ago, before Sirius began exchanging some of these, they stated they had a $200 million basket available for new debt -- which basically meant that they could get up to a $200 million term loan. Since then, they exchanged about $125 million for equity and now have $175 million left outstanding... their "basket" should not have shrunk down, in fact, I believe it should have gone up by the amount that they reduced these note by, no?
Regardless, Sirius had $359 million in available cash on their books as of 9/30/2008; I believe that the company likely had positive FCF during Q4, so that amount should have gone up... perhaps to $400 ~ $425 million. Sirius COULD buy back the remaining amount of Feb09 Notes, but that would take a big bite out of cash - so I don't see that happening. And I'm sure they don't want to take out all of this $175 million with a term loan -- but will if they have to -- because they may need this capacity for the other two issues later this year. Instead I see them perhaps taking out a bit more of this $175 million by more exchanges, plus some cash ($50-75 Million?) then the remaining amount via a term loan, at whatever rate they can get... that is IF the banks begin lending.
The fact that Sirius reduced their debt load by $125 million already and is raising a portion of their rates -- should help in their quest to secure a term loan of a similiar amount, IMHO. But who knows how the banks are squeezing them... 6-month LIBOR rates continue to fall, now nearing 4-year lows and expected to bottom out soon. It's a good time to get a new loan, if the bank will give it to them. They're making the right moves, but the market is just so weird -- who knows. Ultimately, I think Sirius will do a mix of equity swaps, cash and some sortof term loan. That is why I see them getting past this at 100%.
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XM $250 Million Credit Facility/$100 Million term loan in May 2009
Unlike other issues, these amounts are not bonds -- these are bank loans. Not only that, but they are low-interest paying loans. With current LIBOR under 2% -- and XM only paying between 150-225 basis points on top of LIBOR -- the interest on these amounts is well under 4.5% annually. Hell I'm only paying 2.99% right now on my own credit line!
Anyhow, often with companies that have expiring credit facilities and term loans that are in the position XM is in, they extend the expiration dates of them. This involves no lending of new money... and coming to an agreement with the banks involved. I believe that if XM can demonstrate that they are sound and moving forward -- perhaps the banks will just take a slight increase in their rate and/or take a cash payment to reduce some of the expiring amount. Even doubling the interest on this at these levels wouldn't have a signficant impact on operations.
But anyhow, there is always the chance that a bank may be stubborn and just want their money; that is why I put just a slight possibility of default on these amounts... not 50/50 but also not 100% guaranteed that they'll extend the expiration. I went basically down the middle of that -- about 70% that XM will be okay.
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XM $400 Million in Dec09
These are the ones that bother me... why? Because they're a big question mark. Who knows what Sirius/XM will do operationally over the next 9 months, who knows what the economy will do, who knows what the debt market will do? And to make matters worse -- the original holders of these bonds originally agreed to the terms and loaned XM the amounts; with the conversion of them to be into XM shares at $50.00 each. This was back when XM's pps was under $30.00... after XM's stock crashed, I heard that these holders were PO'd and believed that they were sold a bill of goods -- I also heard that it was these holders that forced the XM Board to listen to and engage in Karamzin's merger discussion. I can't prove or substantiate this claim -- other than this was the talk for some time that chattered around.
These same holders then agreed to new terms, in order to allow the merger to go through, which jacked the interest rate on them all the way from 1.75% to 10%. I believe that these holders have XM by the balls - and are squeezing them... that concerns me. These same holders could be the one to force Sirius to bankrupt XM, or BK the whole company later this year. And with the economy being a big question mark, that concerns me. I just don't see these holders taking an equity swap later this year -- they'll want their money and that's it. I put the possibility of BK on these amounts at 50/50 at best.
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As an afterthought on the above issues -- I note that Sirius could also go the route of the High-Yield Debt Market (junk bonds), to raise new capital to payoff some or all of the above maturing and expiring amounts. The problem here, as Sirius noted in an investor presentation, there have been no new junk bonds sold in some time (by any company) the market was dry. However, I noted yesterday that there have been some recent new junk bonds issued... but I have to add that I don't know if this is a turnaround in the High-Yield Debt Market, or just some old deals finally going through...
http://www.nasdaq.com/aspxcontent/Ne...%20HY%20Market
If it is a turnaround, XM could refinance these maturing 10% Notes due in December with perhaps new junk bonds at 14% -- the increase costing XM an additional $16 million annually in interest. Which would obviously be covered by the rate increase... but that's assuming that Sirius would need to go this route -- and that their credit rating hasn't improved by then.
...but again, who knows where the economy, where the debt market and where Sirius/XM will be this coming fall. That is my concern.
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Last edited by homer985; 01-24-2009 at 02:05 PM.
Originally Posted by Whynot
I am not the one asking for data to back up your statements, NEWMAN and DEMIAN are.
Thanks Newman --
Regarding open market purchases, that all depends on what is in the Bond indenture. Very often the indentures include covenants that prevent the grantor (XM or Sirius) from doing various things... ie, dividend payments, or share buybacks, or bond buybacks, or early payment on bonds.
I know, for example, that one of XM's indentures includes a covenant that prevents them from paying any dividends, or any share buybacks and/or any bond buyback until that particular bond is repurchased in full at maturity. Which means, that Sirius can't go to the market and buy any of the bonds, in order to retire them.
As for Officers, certainly they are allowed to buy the bonds -- just as they can buy any of the companies securities -- but like equity, they are limited to the windows open by their legal department. Which prevents them from doing much when they are engaged in issues that could effect the company. With Sirius engaged so heavily in refinancing all of these amounts this year (going back to late last year), their officers and directors are locked out of being able to make ANY purchases of ANYTHING the company has that trades.
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Newman - I do not know if Homer replied and I am not sure the following answers your question:
Some bonds have a call option. Some companies often exercise this option when interest rates drop so that they can issue new debt with lower coupons. A call is a kind of option that gives he issuer the right to redeem a bond issue prior to its maturity. This is a legal option.
Most senior management lend money to the company. This is a given if you think about it.... Think about it.
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