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After the close today Sirius XM (SIRI) announced that the company is extending the timeframe on the tender offer to call in the 7% convertible bonds. As of the close yesterday not a single bond holder has tendered and accepted the current offer.

In the initial offer bond holders had until 10:00 AM on March 1st to accept the offer. In order to comply with SEC regulations the company extended the time allowed by 14 hours and is now offering up midnight as the deadline.

The extension is not a big deal as it was required anyway. What may be the bigger nugget of information was that as of the close of business on February 13th, not a single bond holder had accepted the tender offer. Essentially half of the month has passed and there has been no action.

Is this a sign of bond holders playing hardball? It may or may not be, but what is certain is that the clock is still ticking. There is no particular benefit to a bond holder waiting to accept the offer if their intent is to do so. In fact, if a bond holder was intent on accepting the offer, it may be beneficial to do it sooner rather than later.

What we might be seeing here is a waiting game to see if Sirius XM is willing to sweeten the deal. After all, this was the company's first offer. Perhaps these bond holders want to see if a better deal is waiting in the wings. These bond holders do have a decent hand in this proverbial game of poker.

For a bond holder waiting is not without risk. Sirius XM has a good hand of its own. After all, Sirius XM can afford to simply wait it out and service the debt the way it has been, paying it off in 2014 as was originally scheduled.

What is at stake for investors?

There is actually quite a bit at stake in the short term. If bond holders accept the offer we see dilution of about 320 million shares. If the offer is sweetened we see a dilution number that is higher. If the offer is accepted there will be a one time charge in Q1 that will be up to something between $80 million and $90 million (if all notes are tendered). That cost represents 1.5 cents on the EPS for Q1. It is a big deal as to the next earnings report. This could also impact when the company decides to buy back shares, and how quickly they do it. Simply stated there are a lot of moving parts here to think about.

There are just two more weeks left on the Sirius XM tender offer. This does not mean another cannot happen, but we now have a new waiting game to watch as it relates to Sirius XM. Stay Tuned.

Source: Bond Holders Playing Hardball With Sirius XM?