Cowen Sees Upside for Sirius

One worry for sector watchers regarding the merger is the refinancing of putable debt. With credit markets strapped for cash, people worry that the merged company would not be able to reach terms that carried a reasonable rate. One key aspect of the current bonds is their value as they stand vs. the potential value in relation to a merger. Simply stated, would bondholders rather have the current situation, or be a bondholder of a merged company that will deliver synergies?

Cowen analyst Tom Watts believes that current bondholders and management could have an “agreement in principle” by the end of May. The analyst also notes that management had temporarily stepped away from the refinancing talks in order to deal with issues at the FCC. According to Watts, “Timing of the FCC review, and pace of negotiations with XM (XMSR) and Sirius (SIRI), suggest an approval [FCC] could be handed down as early as June, prompting management to make both announcements together.”

While this news is positive in a couple of aspects, it also indicates that FCC approval could still be a few weeks away. It goes without saying that the FCC process would be down to discussion on various drafts that Chairman Martin had drawn up about a month ago. It is our opinion that the sticking points deal with spectrum, minority ownership, and public interest channels. An FCC decision can come without notice.

Watts also notes that Sirius could return to pre DOJ levels which implies a 25% upside.

Position - Long Sirius, Long XM

Comments

[Disappointe...:]

Hey FCC,
Why not July or December! That should give the NAB, and Competitors more time to gain a competitive advantage, and Destroy the retail Sat radio sales for the Xmas Season, if you haven't facilatated that already.
Dissapointed American

2008 May 21 08:42 AM

[cos1000:]

Tyler, doesn't this just mean that the bond holders "agreements in principle, "refinancing talks" are fairly meaningless until a decision is handed down from the FCC one way or the other.

"Watts also notes that Sirius could return to pre DOJ levels" ...which levels are we talking about? $2.85, $3.10 $3.60 and from where $2.85, $2.75, $2.42 or $2.62 where we closed yesturday? I don't see a lot of information here..."as Early as June" doesn't he mean as "Late as June"...well I guess its all relative..to these guys every day in a new one and "hind site is 20-20"

2008 May 21 08:45 AM

[cos1000:]

Tyler, I'm not shooting the messenger... I appreciate your keeping us informed. Thanks.

2008 May 21 08:46 AM

[163888:]

cos1000, I think he means before the merger was announced 3.5, could be wrong though.

2008 May 21 09:21 AM

[paulbrant123:]

Could we all unite and start proceedings to close the fcc. This merger
shows us the fcc can not do its job and we do not need it's imput.

2008 May 21 10:40 AM

[ITS A SIRIU...:]

As an XMSR listener. I will be pissed if there are concessions made regarging bandwidth therefore rendering my sat radio useless!

2008 May 21 10:44 AM

[wholesalecd:]

It's not going to get FCC approval guys. It's a monopoly because there will only be one player in the market. I am disgusted with everyone that thinks this will be a good thing for the consumer. We need to see the big picture here. GO FCC! I praise your hard stance on waiting this merger out and seeing the greed of these companies.

2008 May 21 01:17 PM

[Othegreat1:]

verg, how can you be so blind? The competitive landscape has changed. Let me spell it out.....Look at the dash of most new cars. You have terrestrial radio, hd radio, jack for mp3 player and now wifi. This is tremendous competition for listeners in the car/truck etc. This is a win/win for the consumer. This merger just has a lot of political impications which is at least 1 rationale for the sluggish FCC decision. The FCC will grant approval, albeit with conditions. For what it's worth, If you think its a monopoly, don't purchase satelite radio.....it's a consumer choice not to buy the product.

2008 May 21 02:45 PM

[po'd in Plano:]

turn on your IBM-compatible PC running Intel chips w/ MS Office software...there's your monopoly.

SIRI/XM will only become a monopoly for radio listening if people choose to refrain from all the following alternatives: Ipods/Itunes, terrestrial radio (which is free), web-based services like Pandora and Live365. That's just naming a few competitive options.

A merged SIRI/XM will just be the big fish in a small pond

2008 May 21 06:59 PM

[amoebaman:]

Explain to me how this merger would not be good for the consumer, please? Last I checked, if someone wanted to make use of satellite radio, they had to pay for it. By that fact alone, the merger is good for the consumer. If you are not happy with the prices, content, etc. you can just cancel your subscription.

Verg, sorry to be harsh, but you, sir, are an idiot. "One player in the market" Exactly how do you figure that? XM and SIRI are in the audio entertainment business, which encompasses all forms of audio entertainment, terrestrial, IPod's, internet.

As stated above, a merged company of the providers who happen to use satellites to deliver their product will still be in direct competition with other forms of audio entertainment.

2008 May 22 08:53 AM

[WJD:]

This is a joke.
FCC is a joke.
Free against paid what is the NAB affraid of.

2008 May 22 10:59 AM

[163888:]

verggreatness, The arguement, has always been is it satellite radio or it it radio. The DOJ has said it is radio, if they thought it was satellite radio they would have had some conditions to the merger. Such as they had to give up spectrum to let another competeditor in. So you really have to let that monopoly arguement go. You cant think you know more then the DOJ. If you do then it shows you to be delusional and not worth responding to.

2008 May 22 12:10 PM

[wholesalecd:]

If merged they should be required to give up atleast half spectrum. FCC, please require this if approved. I know you guys will not go against the consumer.

2008 May 22 06:58 PM

[cos1000:]

verggreatness.....I know that you don't really believe that giving up 50% of the company's spectrum is even on the table. Especially if that spectrum requires access to the Siri/XM satellite technology. So you must be here to just piss people off...because comments like: "Go FCC I praise your hard stance on waiting this merger out and seeing the greed of these companies" is just idiotic.....and does not warrant anymore comment.

2008 May 22 07:57 PM

[tony72:]

"free"radio isnt really free,you use electricity to listen to it,ya use power in your car to listen to it,so how is it "free"?i will build a position in siri stock,give it a couple years,it could see $20/share.

2008 May 23 02:30 AM

[killerkaul:]

RE: Cos1000, You have to give vergegreatness?? a break here. He must have gotten some bad weed. Common sense, {Yaaa, back to that!} tells, even the most limp brained, that it is not reasonable, or in the best interest of any company, to sweat, and to work hard, to take risks, to spend a fortune............ only to give away a large part of your company, so that your competition stands a great chance of defeating you in your weakened condition. Looks to me like, if they are going to get fu........... they should at least get a kiss..................... No Quarter.

2008 May 23 03:51 PM

[TIRED:]

I think the fcc is playing with us. They are showing their backsides by not letting this merger thru. They should stop playing and give a answer now.

2008 May 25 01:17 AM