XM Satellite Radio Inc. Merges Into Sirius XM Satellite Radio
In an 8k filed today after the close, it was officially announced that XM Satellite Radio has merged into Sirius XM Satellite Radio effective January 12, 2011. The move, which was not unanticipated, is a natural byproduct of the merger between Sirius and XM years ago as well as the more recent merger of XM Satellite Radio Holdings into XM Satellite Radio in 2010.
Essentially Sirius XM Satellite Radio has taken responsibility for all XM Satellite Radio debt, and the company will now be able to report all activity under the Sirius XM name rather than multiple filings. This move simplifies things for Sirius XM and should provide more clarity in the future as investors research the company.
The XM Debt that Sirius XM is now responsible for includes the 11.25% Senior Notes due 2013, the 13% Senior Notes due 2013, the 7% Exchangeable Senior Subordinated Notes due 2014, the 7.625% Senior Notes due 2018, and the 9.75% Senior Secured Notes due 2015 (which were already part of Sirius XM debt – Thanks Homer).
The 7% exchangeable notes due 2014 have been a hot topic of late that I have received several inquiries about. They carry a convert price of about $1.87 and because Sirius XM seems to be approaching that strike price some people feel that they might be exchanged. While a small percentage of the note holders may exchange, the more likely scenario is that these holders will continue to hold and collect their 7%, converting later on if the stock price warrants it.
Holding the debt is the move that carries the least risk, and why would a note holder give up a guaranteed 7% when they can collect those monies, and still convert to stock three years from now no matter what the price of the stock. Simply stated, if the stock were trading at $3.00 three years from now those holders would have collected 7% for three years and then get a $3.00 stock at the discount price of $1.87.
The essence of today’s 8k is simply cleaning up of the company on paper and simplifying things going forward. The debt picture remains the same as does everything else.
Position – Long Sirius XM Satellite Radio
I don’t beg to differ ,but the debt picture remains the same for now and then we get clarity after earnings. Enough said.
Ok, Spencer… your too dam happy in that picture. You went from mean looking to looking like your sucking on laughing gas – lol ! Don’t you have a neutral picture ?
Anyhow…Finally we’re merged !!
Well said Spencer… I know I don’t come around much, well ever since you pulled the reigns back… but you hit it the nail on the head.
I really wish he’d get someone to help explain it to him. Whatever, I’m still doing my thing… I’m sure you’re sitting back getting a chuckle over the nonsense.
BTW, the 9.75% Notes listed in yesterday’s release — was not an XM Debenture; it was a Sirius debenture that was issued in August 2009. To complete the merger, they had to enter into a new Collateral Agreement.
XM “had” only 3 debts outstanding: The 11.25% Senior Secured Notes due 2013; the 13% Senior Notes due 2013; and the 7% Exchangeable Senior Subordinated Notes due 2014. They then issued additional notes in October last year, being the 7.625% Senior Notes due 2018. At the same time, XM redeemed 93% of the 11.25% Notes also in October last year — and they stated that they were going to buy the remaining $36MM of these on the market, or call them when they become callable in June this year. So they’ll be back down to three debt issues again… the 13% Notes, the 7.625% Notes and the 7% Exchangeables.
But back to the 9.75% Notes… those weren’t XM Notes that Sirius XM assumed… they were already Sirius XM Notes.
Not a biggie.
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Homer,
Not sure what you are referring to about pulling the reigns back, but you are always welcomed here. I wanted to touch base with you, but your contact info was in an old phone of mine. Shoot me an email to [email protected]. Would love to catch up again.
Would be nice to see you opine on the convert holders interest in shorting the stock via convertiable arbitrage. Given the history in this stock, these convertibles were arguably part of the death spiral financing that almost caused the demise of the stock.
Timewarp….
Shorting while holding converts is a time proven strategy and a virtual given
Thanks for the accurate article Spencer. There is nothing worse than someone writing articles poorly that the masses cling to and believe as gospel. It is a situation I am VERY happy I distanced myself from.
Egis…..
I try my hardest to be balanced and accurate. Some do not always appreciate it, but i can sleep well at night knowing that I do not owe anyone anything. I do not do this for a living and that allows me the lattitude of being real about things.