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Dennis Costa
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I am a writer for New Market Players and Chief Editor and site owner. I follow the Satellite Radio and Media Industry and write about current events, providing due diligence to investors and observers of the companies that operate in the audio entertainment sector. I have followed Sirius XM... More
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  • Sirius XM Radio (SIRI): Completes Senior Note Offering, Tender Offer For 11.25% Notes –Says Goodbye Restrictive Covenants 3 comments
    Oct 27, 2010 4:48 PM | about stocks: SIRI

    by Dennis “Cos” Costa

    Today, October 27th 2010, XM Satellite Radio Inc. (XM) announced the closing of its previously announced $700M aggregate principal amount of 7.625%  Senior Notes due in 2018. XM Satellite Radio is the subsidiary of Sirius XM Radio (NASDAQ: SIRI) formed in August 2008, when the FCC approved the merger of the two satellite radio companies.

    Equally as important, and some may consider more important, Sirius XM also announced that it exercised its option and accepted for purchase all of the 11.25% Senior Notes due in 2013.  This was the stated purpose for the $700M Senior Notes so the completion of this transaction was key. The deadline for the completion of the early purchase option for the 11.25% Notes was 5:00 p.m. ET, on October 26th 2010, and is pursuant to the previously announce tender offer and consent solicitation made on October 13th. The total amount of 11.25% Senior Notes to be purchased today is $489,065,000.

    The ~$489M of notes tendered, represents a sufficient amount of the 11.25% Notes, for XM to receive consent to adopt the proposed amendments to the 11.25% Notes, the indenture governing the 11.25% Notes, and the related security documents that apply to them. This is important because it gives affect to eliminating the most restrictive covenants, and certain of the events of default contained in the original indenture governing the 11.25% Notes. This amended indenture now releases the security for, and guarantees of the remaining 11.25% Notes. This represents another debt restructuring transaction that removes leverage of Sirius XM’s assets from its debt outstanding.

    Earlier this year on March 16th 2010, Sirius XM made full repayment of its $244M, Senior Secured Term Loan due in  2012, with proceeds form the 8.75% Senior Notes guaranteed by wholly-owned subsidiaries of Sirius, on a senior “unsecured” basis. This transaction de-leveraged virtually all of Sirius’ satellites used to secure the 2012 Senior Term Loan.

    It is this type of balance sheet restructuring that allows the company to be available for other business opportunities, as has been mentioned by CEO Mel Karmazin in the past. For the company to consider developing a share buy-back program, it is necessary for the restrictive covenants to be removed, enabling management of the company to be placed back into the control of the Board of Directors –not the Bondholders. It is also this type of financing and debt restructuring that equals the playing field for all bondholders in a default situation, making investment in these financial instruments more attractive. These types of transactions are why credit agencies have been rewarding Sirius XM with credit upgrades on new debt, as it continues to grow top-line revenue, while managing expenses and its balance sheet.

    Sirius XM Radio will be reporting their third quarter operating and financial results in a Conference Call, scheduled for Thursday, November 4th at 8:00 a.m. ET.

    Position: Long SIRI

    Disclosure: Position: SIRI Long
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Comments (3)
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  • BRUCE E. W.
    , contributor
    Comments (686) | Send Message
    Dennis: I am curious as to why certain large trades are allowed with multiple digits above one dollar. I am told that these are not allowed and the market does not allow me to place an order with 1.0001 so why does this happen? Today there were 2 major trades that spiked up at around 10AM @ $1.4699 and $1.4695 which appeared to precipitate a 90k trade @ $1.47. The spike disappeared as quick as it had appeared but those two multiple trades were for over 2M shares. How is this managed on a market that is supposed to be transparent and marketed at a fair price exchange spread?


    Incidently, I just discovered your location and I am relly happy to have found some down to earth reality information. This is the first time accessing the "instablogs" but I clicked to follow you so hopefully my alerts will include your entries from this point on.


    Thanks: Bruce E. Woych (AKA: Bruce E. W.)
    28 Oct 2010, 11:24 PM Reply Like
  • Dennis Costa
    , contributor
    Comments (61) | Send Message
    Author’s reply » Bruce,
    While it is true that Retail investors cannot trade to the four decimal place for stocks trading above a dollar, I do not know of any restriction placed on Market Makers from doing so. As a matter of fact some brokers do not allow 4 digit trading below a dollar, Etrade comes to mind on retirement accounts.


    It is this type of trading that gives margin to the MM's for making the market. Also large trades, more than that seen and noted, placed by Institutions are sometimes negotiated, and may well be to the fraction of a cent in their final execution.
    29 Oct 2010, 02:32 PM Reply Like
  • BRUCE E. W.
    , contributor
    Comments (686) | Send Message
    Thanks so very much! First time that I have received a direct answer on this. Much appreciated! Bruce
    3 Nov 2010, 03:54 PM Reply Like
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