Sirius: Is Chapter 11 Good for Shareholders? 86 comments
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When might Chapter 11 be good for holders of common stock? Quite possibly when it involves Sirius XM Radio (SIRI). I’ll be honest, the reports of a potential bankruptcy filing had left me feeling baffled to say the least. It wasn’t until I listened to Tyler’s Take on SiriusBuzz radio and had an online meeting with Newman, this article’s co-author, that revelations began to unfold in front of us. Newman had made the suggestion that perhaps the recently leaked bankruptcy filing by Sirius XM involved only XM Satellite Holdings, rather than the parent company of Sirius XM. A simple Google search on the topic revealed hundreds of such cases. As a team, we decided to investigate the possibility a bit further and a hypothesis began to develop.
In this filing with the SEC, the corporate structure of the newly formed Sirius XM makes clear that the debt of XM was to remain the responsibility of the subsidiary corporation of XM Satellite Holdings Inc. (page s-9)
“What if,” we asked ourselves, Sirius XM now has the technology to broadcast both services over the Sirius network alone. This patent, issued in April 2008 demonstrates that the company has the technology to broadcast dual services. Although the patent addresses commercial vs. non-commercial, the technology could easily be adapted to broadcast separate services over different bandwidths, a technology similar to HD radio technology. This could explain Sirius XM’s recent channel consolidations as well.
According to Todd Mitchell of Kaufman Brothers, Ergen may simply be after XM’s satellites. XM currently has 4 satellites in the air, along with a spare on the ground. With an average price of about $500-750 million each, XM could potentially bring in 2.5 billion dollars.
As we considered the potential further, several other questions began to arise. We considered which company held which licenses. The FCC’s approval of the merger granted the transfer of XM’s license to Sirius XM Radio.
We considered the contracts held by XM with GM, Honda (HMC) and MLB. Mel Karmazin had stated that he had held talks with all of XM’s partners, many of whom now sit on the merged company’s board of directors. Under Chapter 11, these contracts could potentially be reworked to be more cost friendly to Sirius XM. It would also be in GM’s and Honda’s best interests to do their negotiating with the current board of directors who have both of their interests in mind (after all, they are ON that board of directors) rather than a board of directors selected by Ergen, or worse yet, a judge with no business experience. It would stand to reason that the OEMs would want the factory installed XM radios to continue working.
Yet another potential clue can be found by subscribers who have been inundated with channel updates, which could in fact be firmware updates to enable the receivers of both companies to work off of the same basic system.
All of this means of course, that if in fact Sirius XM can now provide both services over the Sirius network alone, that the XM Satellites and repeater network are now a disposable asset. As most of the company's 2009 debt obligations are backed by these same XM assets, the company would be wise to use these as a means of ridding itself of the huge debt burden placed on it since the merger with XM. By simply putting XM holdings into chapter 11, Sirius will in fact eliminate 2/3 of its outstanding debt. It would accomplish this, and save its investors as well. Sirius XM currently has about $3.2 billion dollars in debt. Out of that debt, Sirius owns about $1.1 billion and XM owns the other $2.1 billion. The only debt that Sirius has due this year is the $174 million payment coming due next week. The rest of the $783 million is all XM’s.
The bottom line may be that Sirius will have acquired all of XM’s subscribers with the merger, and none of its debt.
Disclosure: Author is long Sirius XM
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This article has 86 comments:
I can imagine how fast the pps will take off if the much maligned Mel can pull a debt dissolving rabbit out of his hat!
Still, after the lessons I've learned from the stock market lately; I think I'll start burying my retirement cash in coffee cans in the back yard...seems less risky...
"When might chapter 11 be good for holders of common stock?
Quite possibly...revelations began to unfold in front of us. ... perhaps the recently leaked.... A simple Google search... revealed hundreds of such cases. ...a hypothesis began to develop.
“What if,” we asked ourselves.... This could explain...
As we considered the potential further... several other questions began to arise.
these...could potentially... It would stand to reason....
Yet another potential clue... which could in fact be...
All of this means of course,
The bottom line may be...."
Feels too good to be true. Ergen would certianly know about this before buying up all the dept in an attempt to take over.
Any thoughts?
alright, alright, ...... but definitely lipstick only......
this seem to be too simple unless it can be "pre packaged" with all debt holders in agreement on the finance side. I can't see how you can go in one door of the BK proceedings and come out the other end just stripped of over capacity and all that debt. Their are too many questions about the technology compatibility also....
On Feb 12 05:18 PM JamesPS wrote:
> If Sirius Sats could brodcast to both XM and and Sirius Receivers
> I think we would have heard about amoungst all the talk about interopperable
> radios.
>
> Feels too good to be true. Ergen would certianly know about this
> before buying up all the dept in an attempt to take over.
>
> Any thoughts?
I wonder where Cramer would be if this position were to take shape. BUY BUY BUY!!!
Hi, Now why would anyone print this? Sirius has not been unable to meet it's debt payments. The debt payments are not due yet and it remains to be seen what outcome will result.
Long SiriusXM
I bet Sirius XM could be sued over XM debt dispite any disclaimers they may have
On Feb 12 05:40 PM mlongj wrote:
> Out of all the possible outcomes, I would pick this one in the aritcle.
> Great research Brandon!!! Wow! Who knew this could actually be a
> realistic outcome. At least we are not bankrupt today, so, for the
> moment all is well. This sounds like a logical conclusion since the
> debt is separated between the two entities. It would make sense to
> get the debt handled by selling the unnecessary satellites to pay
> the majority of the debt. This is the first positive article of its
> kind. Thanks for keeping it positive in the midst of all the swirling
> doubts. Great Article for shareholders.
>
> Long SiriusXM
The patent cited does not do any of this. Filed in 2002, it applies something similar to satellite radio as is found in tiered cable TV--basic cable with ads, a higher premium tier without ads like HBO. The patent broadly describes a theoretical radio system to do this with could be applied, with new receivers and transmitters, to either Sirius or XM. It does not confer interoperability between two incompatible systems.
Any other EE's out there care to comment if I'm wrong...
On Feb 12 05:33 PM mogami_99 wrote:
> "Sirius XM (SIRI Quote - Cramer on SIRI - Stock Picks) hit a stumbling
> block this week as it was unable to meet its debt payments. But the
> fat lady isn't singing just yet as options seem to be getting a better
> signal for the weak company."
>
>
> Hi, Now why would anyone print this? Sirius has not been unable to
> meet it's debt payments. The debt payments are not due yet and it
> remains to be seen what outcome will result.
>
www.examiner.com/x-426...~y2009m2d12-MLB-and-NF...
On Feb 12 06:08 PM Sirius Roadkill wrote:
> not sure why my original lipstick post was taken down . . . but it's
> gone
>
>
> On Feb 12 05:24 PM cos1000 wrote:
Good Luck to All Shareholders---Keep the faith!!!
Long SiriusXM
good article and clears up the escrow accounts and payments due. it would appear that their 3/1/09 payment to the MLB is already reserved for. the questions seems to be what will it be replaced with as part of the negotiations. Even a reduction in the amount of years reserved would give them a $60M relief this year and possibly a reduction next year with renegotiation of the existing contract with a new term. Thanks
SNPMarketScopeResearch... 10:57:06.000SIRISIRIUS XM RADIOT.Amobi-CPA,CFAS&... MAINTAINS HOLD OPINION ON SHARES OF SIRIUS SATELLITE RADIOUnconfirmed WSJ report says SIRI seeks funds from Liberty (LINTA 3.26, NR) (LCAPA 5.15, NR) to rebuff Echostar (SATS 15.66, NR) bid. Given Liberty's control of DirecTV (DTV 22.62****), and SAT's common control with DISH (DISH 12.78*), it seems latest unexpected twist in SIRI's financing woes sets stage for control battle between two satellite TV providers for control of the sole satellite radio company, given very weak financial status. We note interesting mix of tripartite personalities in SIRI's Karmazin, DISH's Ergen, and now Liberty's Malone.|US;SIRI|20706|...
On Feb 12 06:36 PM cos1000 wrote:
> I'm curious, with the weekend coming up, Monday being a holiday,
> what do people on the board think anyone holding a short position
> tomorrow might due at around 3 pm. Would you hold it going into the
> w/e with some decision almost certain on the $175M due, or do you
> hold that position??
On Feb 12 06:37 PM cos1000 wrote:
> sorry, or do you buy and close it?
question is can Mel pop the bubble?
On Feb 12 06:37 PM cos1000 wrote:
> sorry, or do you buy and close it?
My question assumes no new news flow . ..
My main block I am married to . . . have been since '04; that goes down with the ship. I've already rationalized that it's gone.
I guess it would be a small moral victory to take a little off at a profit . . . pay for a few dinners out maybe . . . or maybe I'll just donate it to a local "no-kill" animal shelter . . . I would at least feel like the money went to a worthy cause.
Thanks for your input . . .
On Feb 12 07:02 PM cos1000 wrote:
> I bought 15K shares today at .064. I would take 1/2 off at .12 and
> leave the rest..... this is a small part of what I have in but I
> treat is as a new investment trying to work my way back..... I would
> put the $900 into something else.....
we just got punched in the gut by homer985 over at "SB"
looks like this article thread is now dead unless we divert from the topic
now back to Ergen v Karmazin-Malone . . . which is where the news flow is right now . . . I still feel positive that Malone will provide the needed infusion and that Kraft will influence some type of relief . . . I am taking a break for a few hours but will check back later for any developments
keep an eye on the siri ticker at the google business page . . . new articles are posted pretty quickly there to the top right of the page
On Feb 12 07:53 PM cos1000 wrote:
> yeah I saw it......... still wasn't really news anyways IMO. The
> Karmaze, Malone, Ergin, dynamics are more relevant along with some
> relief from MLB escrow on 3/1...... As far as my main investment
> I cried over that already with some losses I'll be able to take over
> the next decade or two..... That's why I am trying to play this piece
> I bought down here to take as I go or would with any other Investment.
> Get a two 'fa take half...... I have another lot of 40K sh that I
> have averaged in at .145 before this recent nightmare began.... so
> I need to take what I can while I can and move on....... so far this
> company and stock has never failed to disappoint...............
no new news as I post
will check back in a few hours
On Feb 12 07:54 PM 163888 wrote:
> I have to agree with cos1000, here I dont think it is possibl;e to
> just take XMSR into bankruptcy and come out as freash as a daisy.
> First of all part of that 360 million left in COH was some of XMSRs.
> Second there were as already said agreements with the debt holders
> to extend the XMSR debt after merger. I am sure those carry some
> kind of connection to SIRI assets. I am not saying it could not be
> done, just that it would not be as easy as this article thinks it
> would be or that SIRIXM would come out of it as clean as the article
> makes it out to.
On Feb 12 05:28 PM cos1000 wrote:
> Also, why simulcast the programs now and not announce this as a synergy
> before?? Can you imagine the cost savings if the technology could
> be that easy to match up. Magically upgrade the XM radios to receive
> Sirius' satellite broadcasts. That would have been huge news...<br/>
I am also in the same camp as Tyler stated in his "Tylers Take" radio show. where as I stated before that bankruptcy is not an option at this point with all the tools Mel still has left and only 173 million in Feb converts to pay off. He still has a responsibility to shareholders to take every avenue there is before filing bankruptcy. I some how can see a bankruptcy judge saying, "Why are you even here at this point you still have 360 in COH and less then half of that to pay off. Your shareholders also just gave you the right to dilute to the tune of 3.5 billion shares and do a RS so you dont have to be standing here in the first place. Why dont you do everything possible first and then come bank and see me." Now I must be crazy because for some reason somehow the reports coming out say Mel still has to raise the 173 million. As I said before where does he have to raise it from THE BANK THEY ARE KEEPING THE 360 MILLION IN COH IN, just makes no sense.
Liberty Media has sure being raising lots of money as of late. See all the form 4's here. Selling tons of shares of IACI. www.nasdaq.com/asp/quo...
I'd have to go back and re-read that whole dust-up again. I can't remember what he said in that original personal email cuz that thread was so long.
May I say that it was great entertainment while it lasted . . . it was like a virtual bare-knuckles John L Sullivan vs James J Corbett 50 rounder. I was waiting for Charles to hop on a plane to Michigan. That was a real beaut! Took my mind off the stock for 10 minutes
There are so many "john's" over there now that I am no longer sure which one is you . . . there was a blue-color "johnjojo" in the forums the other day.
On Feb 12 08:23 PM 163888 wrote:
> Sirius Roadkill, I see you are back here from Sirius Buzz, Have you
> seen any interesting history channel shows lately, My favorite is
> "The Universe". Also I see you cought that thread I had for Charles.
> As a impartial person did that email he sent to me seem to be put
> in a nice guy kind of way or would you taken offence to it also.
The Malone cash infusion looks to be the answer right now; Reuters just confirmed that they are still in discussions. I feel something workable will get done there. That they are still talking after all this time suggests to me that they MIGHT be ironing-out details and COULD have already reached an agreement in principal.
How long can you just sit around a room and talk. UBS must be reading documents at this point.
I'm keeping my eye on the newswires . . .
On Feb 12 08:30 PM relmar2003 wrote:
> Maybe Clayton told Ergen what they were planning, and bought up XM
> debt on purpse...To wrestle control of XM holdings or block this
> attempt...Leverage...H... might just want a cheap buy in, or use
> of equipment...
Are you talking about the show that talked about "string theory" and how there are really 7 or is it 8 dimensions now. It seemed they added dimensions as they needed them to corrispond to their theory.
On Feb 12 09:31 PM 163888 wrote:
> Sirius Roadkill, I am the one with the lower case "j" and all the
> sarcasm. I did that so I was not confused with the other "Johns".
>
>
> Are you talking about the show that talked about "string theory"
> and how there are really 7 or is it 8 dimensions now. It seemed they
> added dimensions as they needed them to corrispond to their theory.
"Give us Liberty Media or death by a Thousand Cuts"
I just finished reading "homers" post at Sirius Buzz. I should have read "homers post before I spent the time typing here I could have just reposted it here instead.
I think you win the prize for best first post...
Hard to say if all that liquidation is related but it could be...it fits the timeframe and m.o.
I remember seeing that doc on String Theory. Pretty damn cool. Ah yes Quantum Physics.
163888...
Here'e how I'm looking a this. First, the rumor that Ergen holds the right amount of 2 1/2 Notes seems more and more plausible. Hence Mel not using anymore shares, which we know he has. (btw...guess that poster who said there was a 24M payment due on Monday and SIRI would make it was full of it). If Charlie doesn't own enough 2 1/2 Notes, he sealed the coffin on using anymore shares anyway letting the BK cat out of the bag, dropping the SP to .06. God knows Mel has the shares, he just can't use 'em anymore. But my take is most likely Ergen does have the reported Feb tranche, hence this immediate BK talk.
But to your point about using COH. Which most likely Mel could do...for now. BUT. My take on that is: He's at that proverbial place of decision. Sure he could use most of his valuable COH for the 175M, but if Charlie also owns enough Dec 10% and/or the UBS AG 100M, paying off this 175M is a waste of valuable liquidity. This is that point of decision any regular consumer would face also. You have this cash, yet you face other debt problems that seem unsurmountable. You have two choices. Save that cash and head to court, which you keep throughout while you let a judge help renegotiate what your creditors refused to out of court, or you spend that cash now, hoping you can still negotiate later. But once you spend that cash, if you come up empty in negs, then you're TOTALLY screwed. You still have to file, but you also now have no cash. Having a hostile creditor like Ergen, who really just wants to take you down, is nothing to look forward to. It's a lose-lose play for later this year IMHO. Mel is doing the right thing now. Either do the RIGHT, friendly solution that's additive (i.e. Malone and Liberty), or head to court. As in most reorgs, he would emerge with his still positive cash, renegotiated debt with some of it forgiven, and he won't be a hostage of Ergen.
None of us or Mel wants to see BK happen. What a nightmare that would be. But I'm just saying that if that were the only other option to using COH, to pay this tranche but still have Ergen on the doorstep the rest of this year, I don't see Mel picking using the cash. I would save it too.
couldnt have said it better. I have believed all along that Mel is looking down the road, beyond Feb, and realizing that with no shot to survive bk is his only option to keep the company alive. i read the articles, the blogs and the boards and there is a ton of "hope" out there. but the facts are that this business model is taking to long to reach profitability. the fcc delay and lack or credit are two obstacles that just can't be overcome. only hope at this point is malone imo. ergen will take the longs out as will bk. i believe mel's pulling out all the stops to avoid bk, but his options are very limited.
Headline says:
>>NEW YORK, Feb 12 (Reuters) - With only days to go until a critical deadline, Sirius XM Radio Inc (SIRI.O) is still in talks with potential investor Liberty Media Corp (LINTA.O), a person familiar with the matter said on Thursday.
The talks are seen as a last-ditch attempt by Sirius Chief Executive Mel Karmazin to stave off a takeover bid by Charles Ergen's EchoStar Corp (SATS.O), which holds $175 million in Sirius convertible bonds due on Feb. 17.<<
I think that we will all soon hear the details of the crux of this Ergen thing... in his "takeover bid" for SIRI. As most of us know, it was never forcing BK to pick up cheap. He just outright wanted the company and Mel wasn't having a bit of it.
But then:
>>But analysts said Liberty, led by cable mogul John Malone, is unlikely to help the Sirius satellite radio service since that could complicate his own long-term satellite plans.
Liberty Media is in the process of splitting off most of its Liberty Entertainment (LMDIA.O) unit, which owns the majority stake in U.S. satellite TV operator DirecTV Group Inc (DTV.O).
"We believe it is highly doubtful that Liberty makes an investment in or acquires Sirius," Collins Stewart analyst Thomas Eagan wrote in a note Thursday. "Adding Sirius to (Liberty) would complicate any transaction with DirecTV."
Moreover, Eagan said DirecTV's management does not want Sirius, the biggest provider of satellite radio service with more than 19 million subscribers, combined with its operations.<<
Now here you've got more conflicting issues. Hmmm. Let's see. Why would Charlie want SIRI so badly? Bad enough that he's bothered to do this extravagant scheme of buying debt to force a sale. Is it just to see if he could get lucky and get it on the super cheap? Highly doubtful since we know he knows Mel very well and knows Mel would never do that.
This was also in the Reuters article:
>>While analysts do not expect Malone to lend a hand to Karmazin, they find the idea of a tie-up between Ergen and Karmazin even harder to fathom.
The two veteran media executives have an adversarial history spanning back to 2004, when Karmazin was president of Viacom, which at the time owned the CBS television network.
Ergen was feuding with Viacom over the carriage of CBS stations on EchoStar's Dish Network satellite system.
At one point during the dispute, EchoStar pulled the plug on CBS stations in more than 1 million homes in 16 cities, including New York. While the dispute was eventually resolved, analysts suggest that bad blood may linger between them.
"If you step back and look at potential combination, (meshing) the personalities might seem to be a bigger issue than the businesses," said Barrington Research analyst James Goss.<<
No, Charlie has wanted in to SatRad at least we know since 2003 by way of the Business Week article. We also know that Charlie's Dish struggles to stay up with Direct TV...What Charlie could be thinking is to buy SIRI on the cheap, then sell it off for parts and reallocate funds into his dream of in-car content.
BUT. Now, at very least we know this. Analysts may say Malone won't do a SIRI deal to be additive to Direct. But could it be that Malone now might have and want to do a deal with Mel, just to block Ergen (Malone's main competitor) from getting SIRI or even any assets in court? Letting Ergen get anything here (except heartburn) is like Malone knowing his house has termites but not doing anything about it. All Malone would really have to do right now is inject enough cash for Mel to buyout Ergen. JPM could still give SIRI an extension into 2010 on the 250M Revolver. So it would potentially cost Malone about 700M to keep SIRI going (and growing as they are), bitch slap Ergen into submission (once again), and then see what happens in the future. What does Malone really have to lose? He assumes the debt of a company gaining ground into positive cash, gets interest and makes some coin, and at the same time it keeps Ergen and his punk ass mini empire treading water (and without any SIRI assets). It also establishes a good relationship with Mel and SIRI and more importantly the entire industry of SATRAD, for if in the future they can or want to make a synergy of product delivery, advertising, et al...
I think Malone HAS to do this. As I said before, Charlie Ergen may have actually done Mel, SIRI, SATRAD, and us shareholders a huge favor just by showing up.
The firmware mentioned is only to incorporate compression so that some best of XM channels can be played on sirius receivers, and so that the best of sirius can be played on XM receivers.
What Brandon fails to realize is that the problem with these receivers is that they only respond or receive reception to the frequency governed by the satellites that they are governed by.
This means if you shut down the XM satellites you lose all subscribers that own XM receivers.
Nice try Brandon, but you are not tech savy enough to understand so don't lead the share holders into thinking that there would be hope.
Here are the solid FACTS.
Sirius ceo Mel Karmazine never executed a press release to the press that the company was filing for chapter 11 bankruptcy.
Chapter 11 bankruptcy is a long process to file for. Bankruptcy isn't going to happen in the next few days, It may never happen, but in any circumstance it does take time to prepare for. Notice I used the word PREPARE, it's only in preparation for in case it happens and to prevent any take over, that's it in a nut shell.
Regardless chapter 11 would be better than the credit circumstances that sirius is under right now regardless. Creditors and banks would have to go through long tedious processes of review to collect money. Sirius is already on a cash flow basis from quarter to quarter. Now chapter 11 isn't liquidation bankruptcy, that would be chapter 7.
Your article misconstrues chapter 7 with chapter 11 reorganization. Sirius/xm radio has already downsized, reorganized, and restructured XM for these circumstances and has done so since quarter 3 of 2008. Anything more would just be a liquidation of assets which is chapter 7. Did you ever wonder why xm and sirius music channels merged? It's the cost savings of restructuring.
Not to mention just doing away with the xm assets is a liquidation process under chapter 7, or at least that's the way you represent it in your article.
Chapter 11 allows you to operate with your assets without any liquidation, it actually makes it harder for creditors and banks to collect since they would have to talk to a bankruptcy judge just to agree to terms upon collection.
I do agree with what he's said in the past. That's the baffling part of all this. And as you say, it would seem all he has to do is come out and say he's going to pay the 175M. SP goes up, he can do a little more dilution and etc...But something else has to be preventing that as the obvious solution. We won't know exactly until this thing is resolved.
And maybe Mel's first priority is to see what kind of "one swell foop" he can do with someone like Malone. As you say, if he truly wants to pull that COH trigger, he can in the time it takes for electronic money to transfer. So of course they always do have that option. I was just saying, with Ergen still in the picture for Dec...and uncertain how '09 credit will unlock (so far it's not that great an outlook for this year), he is right to consider the weight of his options looking longer-term and how important Cash is not only for anyone, but esp. for SIRI.
Einstein may have deciphered the unified field theory but it's doubtful he could decipher this puzzle known as SIRI LOL...
But soon we'll know the answers....not from a physicist but a salesman named Mel.
Peace/out for tonight...
The attached likely doesn't add much new information (although it was news to me that USB AG was advising Sirius) but it is a good summary and the latest one I've seen.
Karmazin Seeks Sirius Salvation With Ergen-Malone ‘Cage Match’
Email | Print | A A A
By Serena Saitto and James Callan
Feb. 13 (Bloomberg) -- Mel Karmazin, chief executive of Sirius XM Radio Inc., is pitting two media billionaires in a “cage match” to save the satellite-radio company he formed almost seven months ago.
Karmazin is in talks with John Malone’s Liberty Media Corp. and DirecTV Group Inc., the satellite-television company it controls, about a possible transaction, according to people familiar with the situation, who declined to be identified. A deal may help avert a takeover by Charles Ergen’s EchoStar Corp., which holds $175 million in bonds due Feb. 17.
“John Malone and Charlie Ergen would both be absolutely satisfied to put down the other in a public way,” Bishop Cheen, a bond analyst at Wachovia Securities in Charlotte, North Carolina, said in an interview. “They’re natural cage-match contestants. This is media theater at its best.”
Malone and Ergen, both based in Englewood, Colorado, control the largest and second-largest satellite-TV broadcasters respectively and could use Sirius XM’s capacity to integrate radio and TV services, according to Fred Moran, an analyst at Stanford Group. Over the decades, the two men have competed for customers and over acquisitions. In 2003, Ergen, 55, abandoned a bid on DirecTV’s then-parent company, Hughes Electronics Corp.
EchoStar has been buying some of New York-based Sirius XM’s debt after Karmazin turned down its unsolicited bid for the company, a person familiar with the plan said Feb. 10.
‘Cunning Negotiators’
“These are three of the most cunning negotiators on the planet,” said Chris Marangi, an analyst for Rye, New York-based Gabelli & Co., whose affiliate Gamco Investors Inc. owns Liberty and EchoStar shares. “It’s logical for Karmazin to pick up the phone and call Malone. There are very few people in the world who know the value of the subscriber business and the spectrum and can come up with the financial engineering to pull it all off.”
A deal with Malone, 67, or Ergen may prevent Sirius XM from seeking bankruptcy protection. The broadcaster has been working with lawyers to prepare a possible filing, the New York Times said Feb. 10, citing unidentified people close to the company.
Karmazin, 65, completed the merger of Sirius and XM, the only two U.S. pay-radio providers, in July, after the credit- market crisis took hold. Sirius XM has about $3.25 billion in total debt. The stock has traded for less than $1 a share since September as investors became concerned that Karmazin wouldn’t be able to manage the debt or meet growth projections.
Patrick Reilly, a spokesman for Sirius XM, declined to comment, as did Marc Lumpkin, a spokesman for EchoStar. Robert Mercer, a spokesman for El Segundo, California-based DirecTV, said the company doesn’t comment on speculation.
Calls to Ergen’s and Malone’s offices weren’t returned.
EchoStar Dispute
Karmazin, who was president of Viacom Inc. until June 2004, has feuded with Ergen too. Viacom was at the time the owner of the CBS broadcast-TV network, since spun off.
Ergen, who founded EchoStar in 1980, sued Viacom in January 2004, claiming it was breaking antitrust laws by demanding that EchoStar carry less-popular cable networks to continue running the signals of the CBS stations.
During the dispute, resolved later that year, Viacom kept its channels off the Dish network for two days and callers to EchoStar were greeted with a recording that divulged Karmazin’s home telephone number, Mediaweek reported on Oct. 11, 2004.
Sirius XM rose 2 cents to 7 cents in Nasdaq Stock Market trading yesterday. EchoStar, down 57 percent in the past year, rose 6 cents to $15.21. DirecTV gained 54 cents to $23.48 and has declined 1.7 percent in the past year.
EchoStar, a satellite-equipment company, was separated from Dish Network Corp., the television service also controlled by Ergen, at the beginning of last year.
Ergen ranked 35th in Forbes’s list of the 400 wealthiest Americans with an estimated fortune of $8.1 billion last year. Malone’s net worth was $2.3 billion in 2008, according to Forbes.
Malone’s DirecTV
Malone gained control of DirecTV last year after buying out News Corp.’s stake. Rupert Murdoch’s News Corp. had bought the stake in 2003, after Ergen dropped his bid on DirecTV’s parent company because he couldn’t get regulatory approval.
Dish Network had 13.8 million customers as of Sept. 30, trailing DirecTV’s 17.3 million. Sirius XM, which lured customers with programs including talk-show host Howard Stern and the National Football League, has more than 18.9 million subscribers.
“All of these companies are satellite-delivered media,” said Stanford Group analyst Moran, who is based in Boca Raton, Florida. “If you can cross-market, cross-promote and intertwine services between satellite video and satellite audio, you could strengthen your competitive position.”
UBS AG, Switzerland’s largest investment bank, is advising DirecTV on its talks with Sirius, according to people familiar with the matter. Douglas Morris, UBS spokesman in New York, declined to comment.
Roger Altman, CEO of investment bank Evercore Partners Inc., confirmed on a conference call last week that his firm is working with Sirius XM. He wouldn’t say whether the work involves mergers and acquisitions or restructuring.
On Feb 12 11:53 PM sl62 wrote:
> Yeah, I saw that article too. How interesting that this has evolved
> from just how SIRI will deal with debt, to a clash of the titans...two
> of which (Mel and Malone) have a history of bitch-slapping the other
> (Charlie) at various times...Charlie's a loser.
Sirius XM Radio has significantly narrowed the divide in talks with satellite mogul Charles Ergen over a deal to save the company from a bankruptcy filing, the Wall Street Journal reports.
However, Sirius, the only satellite-radio operator in the U.S., continues to discuss a rival offer from Liberty Media(LINTA Quote - Cramer on LINTA - Stock Picks), the Journal reports, citing people familiar with the situation.
The Journal notes the gap between what Ergen has proposed and Sirius has asked for has narrowed, but the parties haven't reached agreement yet on other, nonfinancial issues. Ergen is prepared to let Sirius CEO Mel Karmazin retain his position, the newspaper reports.
Ergen, who controls Dish Network and EchoStar, has offered to inject about $500 million into Sirius and restructure the debt he holds in the company in return for control. The offer is contingent on the successful renegotiation of about $600 million in Sirius bank loans and about $200 million in other debt, the Journal reports.
Under Liberty's plan, the company wouldn't acquire Sirius outright or seek to pair it with DirectTV(DTV Quote - Cramer on DTV - Stock Picks), the satellite-TV provider Liberty controls. Liberty would make an investment that would enable Sirius to meet its credit obligations in return for a large stake, the newspaper reports. Neither offer involves buying out Sirius's equity holders.
If Sirius were to be bailed out by whatever means and allowed to continue intact, considering our shares would also remain intact and able to be traded as usual, would it not be feasible that the sp increase to over $1 in a very short period of time, therefore relieving it from the threat of delisting? After all, less than a year ago it was trading at $3, and the company may ultimately be in a far better position in the near term than it was then. Bad economy or not. In this respect, there really would be no point in a RS or further dilution. Could it be that this is why there has not been this action that the RS has just been, yet again, another last resort back up plan in the event more time is needed? It is looking more and more (still in theory, however) like we may have made the correct decision, that is, for all of us who held out and didn't bail on this company. Then again, what more risk is left when the stock is trading at these levels anyway? Unless you bought in at these levels and have the time to day trade, you would have to be a moron to sell right now! Still keeping my fingers crossed.
the credit market's could look positively different 1,2, or 3 months from now but I don't want to take that chance with shareholders, let's just wipe them out now."
Yeah frickin right - I don't think SIRI has this $350m COH or you would have heard more about it from these analysts that keep saying they need to raise this $175m. But if they do, they sure damn use it and live to fight another day for the shareholder.
yes.
Thanks for the post. The reason behind that is Mel bitch-slapped Ergen (who thought he was going to strong-arm Mel) by talking with Malone. Now Ergen sees all his hard work slipping away so he's forced to make concessions...score one for Mel.
thanks.
G
lol, it is looking like a SIRIUSLY good day today.
Welcome to the sleepless weekend.
Some interesting activity today...both in the stock and the way the articles are being carefuly worded. Also consensus among analysts on my mean rec. board has moved toward the strong buy side. Doesn't mean a whole lot.....but interesting no less! Did you see the 2 different ways the debt exchange report came out?
Guess we know how much of that Dec debt Ergen owns now!
Guess we know how much of that Dec debt Ergen owns now!
Whos taking shares of common if the stock is on the brink of BK?
"The purchasers of the new Senior Secured Notes will be paid an aggregate structuring fee of $9.45 million, $5.07 million of which was paid in cash and $4.38 million of which was paid in the form of shares of the Company's common stock based on the closing sales price of the Company's common stock on February 12, 2009, which was $0.074 per share."
Now if they could actually sell the XM satellites, that would be a different story. Although in this environment, on this short time line, I don't see that as being likely.
I'm LONG- Just beat down...