Homer,Originally Posted by homer985
Thanks again for all of your input...
I agree that the Dec. '09 $400 million is the biggest hurdle, but thankfully it is the furthest one out and SIRI's balance sheet and the credit market should be in a much better position by then.
You say that the $400 comes due in "mid December" - where are you getting this from and do you have an exact date? According to the ML report I have, it is Dec. 1st, '09...
It is December 1... I had fixed that and made a couple other changes right after I posted it... but you obviously saw the original post, before I made the change.
Homer,
If the May $250M & $100M bank loans decide to change terms COULD this put them further down the pecking order IF BK would happen? I also figured this was the easiest to extend but why was it not extended months ago as this would have increased the stock price and allowed us to exchange debt for equity on Feb 09's at a higher stock price????
Good question... My guess is that Mel thought he could get better terms by waiting for the economy and credit markets to improve, for the company's balance sheet to be better after Q4 '08 and Q1 '09, and also I think he wants to tackle it all in one swoop. I think the plan is to have the balance sheet and the stock price strong enough for the Dec. '09 debt - which is the most challenging piece of the debt puzzle. The stock would probably respond better to good news in a better economic and credit environment and I don't think he wanted to shoot his wad to soon and at the wrong time - so to speak. In hindsight, he might have done something different, but he probably had no idea that things could get as bad as they did - a lot of people didn't...including me. Things change....
Homer - While you feel the May term loans can be reworked, wouldn't they be at a much higher interest rate , maybe in the 25% range, which could be too burdensome to the company ? I'd take 25% over default, but I'm concerned that it has not already been handled.
Now they may want to erase the Feb 1st. If they could knock down the Feb debt to 100M from 193M with stock sale, debt swaps, etc, then I think it could make sense to pay the the balance of 100M with cash on hand.
Then if you are correct and term loans can be pushed out 1 or 2 years, I think they could pull off December when they are in a much better operating position, especially 4th Q of '09 most likely being a cash flow positive Q. The question is, if they use 100M cash for Feb debt, is ~ 300M enough to fund operations until Q4'09 ?
I think they had over 400M going into this quarter and look like they may burn 32M, I think I read that somewhere from the Dec 18th shareholder meeting.
The big question is, could they potentially get worse in 1Q for financials. I'm concerned the bottom is in the 1Q and then will begin to improve in 2nd half, but we need these deals done by March 1st.
I so much want to believe this will turn out positive and buy about $10,000 worth of stock at this price so I can get some of my massive losses back one day, but I'm so afraid to lose more.
I have been thinking about this a little more....I think Mel's plan for Dec. '09 is to go to several Pawn Americas and get payday loans and cash advances. It's all going to be ok...
Last edited by Demian; 01-01-2009 at 04:51 PM.
25% seems quite a bit excessive. This is from the last XM 10-Q:
~~~~~~~~~~~~~~~~~~~~For the $100 million Term Loan...
"The interest rate is reset quarterly to 225 basis points over the 9-month LIBOR." -- The last rate was set at 5.5625%.
For the $250 million credit facility...
"The interest rate is LIBOR plus 150 to 225 basis points or an alternate base rate, to be the higher of the JPMorgan Chase prime rate and the Federal Funds rate plus 50 basis points, in each case plus 50 to 125 basis points." For $187,500 of the drawn amount, interest as of September 30, 2008 was 4.75%; and for $62,500 of the drawn amount, interest as of September 30, 2008 was 5.25%
Current 9-month LIBOR is nearing 4-year lows -- down at 1.9% as of yesterday. The facility was added and borrowed against when the rate was much higher as well as the term loan.
You really think that the banks would force XM into a rate of LIBOR plus 2,200 basis points?!?!?!? That's pretty excessive, don't you think? A situation like XM could call for LIBOR plus 1,000 basis points as an extreme... which would put the interest rate near 12-13%. But not too much above that, IMHO. Remember, Term Loans (and in this case the facility) generally command lower interest rates than Bonds -- as they are short term borrowings.
With the Fed and Central Banks cutting rates so much -- XM's current terms put the rate on the Term Loan at around 4.2% and on the facility at around 4.25%. By far the lowest rates that XM is paying on any of its borrowings.
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Demian, one of the benefits of the down economy are low LIBOR rates -- with Mel waiting and the rates dropping, he has the ability to negotiate better terms, IMHO.
Homer,
Could the bank the holds the $250M & $100M loans be nervous to change terms in fear of falling down the "pecking" order in BK court IF company would default or file BK? Would it behoov the bank to change terms and attach themselves to both SIRI & XM vs just XM? I really don't understand parent vs subsidery debt???? Any info here is appreciated?
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