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Circuit City's Potential Buyers Offer Hope for Sirius Investors

OKMONEY...

Apologies here too. Obviously if i knew you more I would have gotten your humor...I took it the other way. Sorry, it's been a trying day and thanks for the detailed insight...much appreciated. That's why I post here, to share opinions and knowledge with others. I had the feeling this was your area of expertise.

Hmmm. See your points but I'm going to go out on a limb and still believe that SIRI can get around a formal Chapter event. For a few reasons. See what you think of this...

1. As a specialty content provider, I see them needing to be a bit more careful with reputation and stigma. CC is more of a classic candidate having a lot of brick and mortar and inventory to contend with. As the other poster said, a classic case of over building, then having the floor fall out on top of it...and having the credit card revenue made it easy to mask the other failings of the business execution. Pure B&M retail is a tough space due to trying to properly regulate expansion, so a company like CC filing doesn't surprise me (esp. having to compete with a behemoth like Best Buy. SIRI of course a different model yet plagued by similar over leveraging (talent and now acquisition). Of course as said, if they absolutely need to file, they will regardless of rep, but my take is they will avoid a Chapter at all costs. In addition for the same reason GM did not want to. Look at what happened to GM sales THE MINUTE BK was off the table. Consumers started buying with confidence and increased sales were reported in the last part of Dec... Before that, that's the only question consumers were asking salespeople. "Is the company going out of business?" (which is the stigma with any kind of official Chapter filing, IMO). Granted a SIRI sub is not a car purchase, but I think the concept of BK would be alarming to existing and near-term sub base. It would be messy and too much money wasted on damage control. They already tread water IMO with marketing efforts and convincing consumers how great their service is or why they need it. So I'm wary there.

2. Q3 was encouraging and by the increased guidance they released at the meeting, I have to believe Q4 will satisfy the Street (and the point also mentioned at the meeting on their PPT..other potential investors in the company--a la Buffett's Preferred in GS). I do recognize on the latter point that Buffett got 10% and that's the kind of action SIRI is trying to avoid having to pay.

3. I don't know for sure what CC's recent store sales were like prior to filing, but I think I recall they were down overall, and for some time. That was my point earlier about what companies file and which ones don't (necessarily). SIRI's in a different spot, their sales are strong and appear to be maintaining that strength. If churn maintains in Q4, it will be a big positive and support their case for further strength. I realize this has little to do with their ugly debt load proper but it may make a difference with different new funding options/renegotiations...

4. The approved additional shares from the Proxy. Up to now, they have been exhausting their previous approved common in debt for equity swaps. The 2 1/2 Notes due in Feb are with GS. It appears at least that GS sees future value in holding this common (or wouldn't it make sense they would want no part of accepting common shares?). If I were a bondholder at this stage, at this low price and good company metrics, why woldn't I accept equivalent shares for some or all of money I'm owed and hold the shares expecting even more return when the value increases? Why do I also believe that GS has been already assured by the company that a Chapter event is not happening...thereby assuring that this common will remain in tact? You might say well, GS is just taking the shares directly to market for their cash...but by the recent action on the stock, I don't believe that to be true. In the end, having the additional common to work with, I think it gives them just another tool to use. I believe that at .14 much of that dilution is already baked in. The Street so far seems to view this protocol as a positive.

5. Said renegotiation outside of a Chapter with bondholders and bank facilities. Some here, including me, believe the Feb debt is a no brainer at this point. That leaves the next hurdle in May which is a bank facility (I think 300M). The potential there is by showing solid positive metrics post buyout, they might be able to extend that principal. My take is at least a year since they have no debt due in 2010. Dec. 2010 would be optimal IMO and would give them plenty of time to properly address it. Then the remainder of the approx 1B that was due this year is in Dec. Again, nearly a year away yet, it gives them time to work on exactly the best way of addressing that (and in a we all hope a much better environment than the Oct-Dec 08 mess was. In terms of renegotiations with bondholders outside of a Chapter, I've been keeing an eye on CHTR. That's exactly what they have been doing recently. They have a MOUNTAIN of debt (I think like 20B overall--but on 6B of top line). But BK was recently also priced in to their common recently. They hit a low of .08. Last week they popped up to .23 on renogotiation news. Now it will remain to be seen if that was just a short unwind (which as you know, is common at some point near or shortly after filing), or if there is new traction. Next few weeks should tell us that story. As a similar story to SIRI, I'm keeping my eye on them.

At this late stage, I believe SIRI knows their plan (not meaning the one with the capital P lol!). I think the environment is getting better every day coming off of the freeze up in the Fall. I might be more optimistic than you about how this gets resolved. Your points are taken and as you say towards the end of your post, that is a neat little plan. Something tells me though that it won't be the plan right now (at this time). 2013, and the new buyout XM debt due in 2014 will still remain as hurdles for the company. And that may be a time to reevaluate your scenario. But by then, they will be much more established as the new combined entity and with a much higher sub base (according to currenet guidance). It may just be necessary at that time. My take is for now, is they will be able to create enough breathing room for all involved so that things can normalize a little and they can get back to focusing on growing the business. IMVHO...

I'd be interested to hear any further thoughts...