Sirius XM / Liberty Reach Deal

[BobMurdoch]

Winners today.....

1. Charlie. OK, he didn't get control... he just made 5-10x his investment back since the debt gets paid in full for the 10 cents on the dollar (or whatever he paid for it) he paid out. He could have lost it all in bankruptcy, but Mel would have had a shareholder revolt if he did that.

2. Sirius stockholders. -- OK, if you paid $2-9 a share for the stock, it's hard to call you a "winner" at 20 cents a share, but the fact your stock isn't worthless, is a plus. Basically, this liberty "rescue" plan, diluted their shares another 40%, but no one is complaining as the stock goes up 90% in a day on when EVERY other stock on Wall Street is tanking today because Wall St. is finally voting with its' feet on the Obama stimulus plan and heading for the exits....

3. Liberty - They invest a chunk of cash, but get in cheap on an enterprise that still is chock a block full of assets.

4. Mel Karmazin - rumors of his demise are greatly exaggerated. He holds Charlie at bay (and saves his job), he holds the stockholders at bay (and saves his job), and he lives to fight another day (and saves his job). Um, he saves his job.

5. Howard Stern, Martha Stewart, NFL, MLB, NHL, NBA, NASCAR, other high priced contracts.... They all keep their contracts intact. A bankruptcy would have scotched their sweetheart deals which NO ONE would replace...

6. Subscribers - Although unlikely to lose the service outright, a bankruptcy would likely have severely cut the quality of the programming even further than they already did when they merged the two services. They still will get billed more for extra radios and the online service, but the service is intact. Especially for those "lifetime" subscribers, who found that a lifetime might only be a few years.

 

[Scott Greczkowski]

Good list Bob.

 

[BobMurdoch]

One question..... Is ALL the 2009 debt behind them now, or is there still a huge time bomb coming down the calendar at them......?

 

[Trouthead]

Now with one "buyer" of high priced contracts like Howard, MLB, NASCAR etc, can we assume the price of those contracts will be considerably less when they come up for renewal?

Howard need to take a huge paycut along with the rest if they want to continue to get paid when the contract come due.

 

[jacmyoung]

Winners today.....

1. Charlie. OK, he didn't get control... he just made 5-10x his investment back since the debt gets paid in full for the 10 cents on the dollar (or whatever he paid for it) he paid out. He could have lost it all in bankruptcy, but Mel would have had a shareholder revolt if he did that.

2. Sirius stockholders. -- OK, if you paid $2-9 a share for the stock, it's hard to call you a "winner" at 20 cents a share, but the fact your stock isn't worthless, is a plus. Basically, this liberty "rescue" plan, diluted their shares another 40%, but no one is complaining as the stock goes up 90% in a day on when EVERY other stock on Wall Street is tanking today because Wall St. is finally voting with its' feet on the Obama stimulus plan and heading for the exits....

3. Liberty - They invest a chunk of cash, but get in cheap on an enterprise that still is chock a block full of assets.

4. Mel Karmazin - rumors of his demise are greatly exaggerated. He holds Charlie at bay (and saves his job), he holds the stockholders at bay (and saves his job), and he lives to fight another day (and saves his job). Um, he saves his job.

5. Howard Stern, Martha Stewart, NFL, MLB, NHL, NBA, NASCAR, other high priced contracts.... They all keep their contracts intact. A bankruptcy would have scotched their sweetheart deals which NO ONE would replace...

6. Subscribers - Although unlikely to lose the service outright, a bankruptcy would likely have severely cut the quality of the programming even further than they already did when they merged the two services. They still will get billed more for extra radios and the online service, but the service is intact. Especially for those "lifetime" subscribers, who found that a lifetime might only be a few years.

Good ones, the only comment I have is regarding #6, I took the advantage of the great GM incentives for loyal customers and traded in my old truck for a new one a few days ago, this Sirius rescue will allow me to enjoy the three months free Sirius radio without interruption

A few days ago I thought my newly acquired truck would have a useless piece of electronic junk with a piece of ugly antenna on the roof top. Now such reality is pushed back

 

[socalpanman]

It's complicated but we'll soon see many solid well run companies face the same debt problem. What we witnessed is not about too much overhead, or bad management it's about the rules and attitudes suddenly changing regarding corporate financing. Short term debt funding which almost all businesses have to use to operate is suddenly being denied by the lenders. The same lenders who on the other hand hold the contracts and set the rules for the debt.

There is no authority that knows what to do at this time. The theories that created this system have just all failed. More chaos will occur. Sirius/XM, Echostar, Liberty situations will be the success stories this year. IMHO

 

[tinydoughboy]

Good list Bob.

your avator is killing me!! LOL

 

[cjwct]

Charlie . . . now with your new windfalls it is time to pony up for some of the contracts and stick it to Direct by getting ahead with HD Channels . . . what a great opportunity for Charlie . . . take Directs money and move ahead as HD leader . . . am I crazy thinking this?

 

[BobMurdoch]

Good list Bob.

Thanks, your avatar is an especially accurate metaphor for what Sirius stockholders have been going through for the better part of the decade....

 

[BobMurdoch]

Charlie . . . now with your new windfalls it is time to pony up for some of the contracts and stick it to Direct by getting ahead with HD Channels . . . what a great opportunity for Charlie . . . take Directs money and move ahead as HD leader . . . am I crazy thinking this?

I didn't even realize that...... Did Charlie just make $180-200 million by raiding DirecTV's wallet?

Too funny.

One of these days, Charlie's adventures will make a great book.

 

[cjwct]

I didn't even realize that...... Did Charlie just make $180-200 million by raiding DirecTV's wallet?

Too funny.

One of these days, Charlie's adventures will make a great book.

Now hopefully Charlie realizes this and goes on a Spring Spending Spree on DirectTV

 

[wetz73]

Charlie goes off to the bank with Millions of dollars of Liberty's money.

Charlie paid about $.20 on the dollar for the debt. He gets paid the full face value of the Debt. Charlie get a big fat payday today.


Like I had said before it is a WIN WIN for Charlie.

Basically, Charlie gets $5 million for every $1 million he invested. Nice payday!

 

[Dgenx321]

Are you telling me Charlie made 1.5 billion??

 

[CorpITGuy]

Where are you guys getting these numbers? I'm not saying it's not true, but it sure doesn't sound realistic.

 

[BuddyBoy]

Are you telling me Charlie made 1.5 billion??

Where in the world did you get that number???

What I've read is that around $400M of debt was purchased. No article I've read states whether any of this was part of a later debt-for-equity swap.

There remains a $175M debt payment due this month (today?). If Charlie paid $0.20 on the dollar for this debt, he gets $175M for a $35M investment, for a profit of $140M. Assuming that $400M was accurate and not exchanged, that leaves another $225M in debt payments. If he again gets paid at par for the debt, and paid $0.20 on the dollar, he would make another $180M. So if the figures of 20 cents on the dollar and $400M are accurate, that's potentially a $320M gain.

 

[BobMurdoch]

Thanks for clearing that up.....

To put that in perspective, that just about made him "whole" on that amount he lost to in the last two lawsuits to Tivo and someone else I forget....

All for "losing" on his attempt to take over Sirius. Wow, if only "my" failures could be so lucrative....

 

[Paradox-SJ]

Thanks for clearing that up.....

To put that in perspective, that just about made him "whole" on that amount he lost to in the last two lawsuits to Tivo and someone else I forget....

All for "losing" on his attempt to take over Sirius. Wow, if only "my" failures could be so lucrative....

+1

 

[Ramy]

So what you are saying is that our stock goes away? We get .20 per share? Then there is no reason for anyone to be buying any right now is there?

 

[dlsnyder]

So Liberty Media was the white knight today, but that just means Liberty will have a place at the table and not Echostar. So why did they choose to go this route? Sirius has had a long term relationship with Echostar. What has changed? Did they really hate Charlie that much that they would chose "anyone" over him?

 

[jwgreen68]

Wasnt this the same snowball type stuff that people do anyhow (restructuring debt) that gets them worse in debt and then they eventually file for bankruptcy anyhow?

No, not always. It would be similar to someone refinancing their house to get a better rate. It makes the loan longer, but the payments are usually lower and more manageable. A lot of times, individuals/businesses can go into bankruptcy even, and come out stronger and more financially secure than before they went in. A prime example would be Donald Trump. Several years ago he filed for bankruptcy and didn't lose a dime of his own personal wealth. It's all about making those debts more manageable. It's in a creditors best interest to work with the debtor to find a resolution, that works for both parties, rather than the debtor enter into bankruptcy. I'd rather wait for my money a little longer than accept pennies on the dollar from bankruptcy court.