Government Loan for Detroit 3
The $25 Billion that the government is putting up is actually not a true bailout, it is a loan. A quote from the article: “… the loans would probably amount to at least $5 billion for each of the Detroit 3, plus smaller amounts for suppliers.” Is Sirius XM considered a supplier for the automakers? I would sure consider them one, but then again, this is the government we are talking about, so who knows. If in fact they do fall under this provision, it would allow them to borrow money from the government at interest rates as low as 4%. How much would be available to them is another question. This could be one possible way for Sirius XM to refinance at least a part of their upcoming 2009 debt.
Regardless, the automakers having a nice infusion of cash will allow them to produce better and more fuel efficient cars and sell more cars, which would definitely be a win for Sirius XM.
Position: Long SIRI.
Um… no. Considering just for a minute that Sirius subsidizes the car manufacturers, not simply providing parts, why would the government actually find Sirius to be a critical part?
They do owe Sirius for bending them over and drilling them like a sailor to a sheep, but don’t bet that the auto bailout will help at all.
Instead, look for credit markets where they can get better financing from a traditional source. There’s more money by far that way.