Take A Look At The 12b-25 Ext: What Does It Reveal?

[sl62]

btw...

CNBC just reported the damage control going on with GM this AM...to be CLEAR that D&T's opinion DID NOT take into account current financing imminencies and reworking of contracts...

Guys, I think we should not panic here or go too negative. If we play it real-time, and more drama ensues before this thing finally resolves, hey, it's just another great buying opp for if nothing else a decent short-term pop (a la Feb .06 - .20). Best we keep our heads. Brandon can't stop himself from going the negative route and getting the junk out there for MSM to multiply. He might actually be doing us a favor.

[homer985]

So SIRI and Malone could use such waivers if "everything else" from KPMG is good to go and viable..which IMHO, I can't see why it wouldn't be.

I don't see Ergen and DISH signing off on any waivers for Sirius. If they default because of a KPMG "going concern" statement, then IMHO Ergen would demand payment... which ironically, XM may be able to do, since phase 2 of the Liberty investment would give XM $250MM -- which would be enough for XM to repurchase the Ergen held Dec09 Notes.

This is a delicate matter, to say the least.



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[SteveSirius]

Now, looking at today's GM 10K release and "going concern" issue from D&T. CNBC earlier ths morning brought up a good point on this..that may have certain relevancy to SIRI. D&T's warning it appears was soley based on the company and it's state of being AS OF 12/31/08.

As in:

>>"The corporation's recurring losses from operations, stockholders' deficit, and inability to generate sufficient cash flow to meet its obligations and sustain its operations raise substantial doubt about its ability to continue as a going concern,"<<

Thanks for this post!!! It is a welcome insight, and I think you are right on the money with this. Of course Malone did not accumulate so much money being an idiot. He obviously did his due diligence before entering into agreements with Sirius XM (and no doubt had his financial experts go through the books with a fine tooth comb).

I think you are spot on with this!

Thanks!!!!!!

[FoolNHisMoney]

FoolNHisMoney... my figures were based on Sirius XM maintaining 20MM subs for the year... not a decreasing figure. If churn is 1.7% each month, then that will be 340K cancellations each month -- or just over 4MM for the year - which would need to be replaced. My 50% OEM penetration rate is a conservative estimate, yes. Even so, that adds in 2.28MM in new OEM subs for 2009. This leaves Sirius XM needing to bring in about 1.72MM in GROSS new RETAIL subs during 2009... or approximately 430K each quarter.
...

Homer, our numbers pretty much match up well. Except your 340k monthly churn estimate is calculated on the gross 20mm subs where as the 1.7% churn rate is for the self-pay subs, which is some 3mm less than the gross. Based on 16.5mm self-pay (avg for the year) that's 3.366 mm subs lost to churn. That makes the difference between our estimates.

[sl62]

Homer...

Appreciate your diligence...

Question though. The issue of XM being headed for BK before the LBO..I recall reading this back when. I'm going to search and see what I can find. I believe the general consesus at that time (and no secret) was that XM was in very bad shape. I will let you know what I find...

[TWAsiri]

Interesting comment from a poster on SA

"Yes, car sales are down, however the percentage of vehicles going out with satellite radio are much higher. I am a dealer and shareholder. Every car goes out with Sirius. Last year it was less than half. That never gets mentioned and it is a fact"

[sl62]

I don't see Ergen and DISH signing off on any waivers for Sirius. If they default because of a KPMG "going concern" statement, then IMHO Ergen would demand payment... which ironically, XM may be able to do, since phase 2 of the Liberty investment would give XM $250MM -- which would be enough for XM to repurchase the Ergen held Dec09 Notes.

This is a delicate matter, to say the least.



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Homer...

Agreed. Delicate. My meaning in my post regarding a waiver was not that Ergen would, cause I think we know he absolutely wouldn't...it was that Malone/Liberty would waive the "going concern" clause if the only basis for it was lack of fincancing (which Liberty themseleves were supplying)...thereby then triggering their deal (and the JPM extension) and then as you say allowing SIRI to pay off Ergen's Dec 10% tranche.

[Hopeful]

Could Malone have legally seen the 4Q numbers??? I know he must have seen them before making the deal, why would he do it blind. But would it have been legal for him to look at these?

[homer985]

Question though. The issue of XM being headed for BK before the LBO..I recall reading this back when. I'm going to search and see what I can find. I believe the general consesus at that time (and no secret) was that XM was in very bad shape. I will let you know what I find...

Prior to the merger, XM had a slight edge in cash on hand -- the primary difference was 2009 maturities. Sirius had $300MM due in February and XM had $400MM due in December. The XM May facilities I'd always expected to be extended.

In early 2007, with XM just completing its constellation replacement at the time, facing similar growth as Sirius, having a slight edge in cash, having similiar amounts of debt due in 2009 -- but with Sirius facing nearly $1BB in Satellite CAPEX spending from 2008 through 2010 -- I put Sirius as more of a concern than XM. There was no "XM was heading to BK". The majority if that talk was by Sirius holders who were looking to "bash the competition" at the time -- but neglected to research the CAPEX needs of Sirius at the time.

I will likely not agree with the belief that XM was heading towards bankrupcty.



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[sl62]

Interesting comment from a poster on SA

"Yes, car sales are down, however the percentage of vehicles going out with satellite radio are much higher. I am a dealer and shareholder. Every car goes out with Sirius. Last year it was less than half. That never gets mentioned and it is a fact"

TWAsiri...

Good post. I have posted on this fact before on SA as well. Not enough people are focusing on this side of it. Only overall decreasing car unit output from mfctrs. That number can be offset by that particular local saturation number you write about. Also with an activation estimated rate of approx 50% (a little less), there is much growth room for higher activation saturation. So total manufacturer units declining from 12M to 10 or even 9, though it does not engender uber confidence across the board in the space, is not necessarily "the" most important metric concerning how many people actually wind up using the eservice. Then that's where SIRI product quality actually has the opportunity to rise to the top as a legit engine for growth (as it should rather than de facto by just default) IMHO...