Charlie Ergen may need to spend $100 million or more if he wants to take control of Sirius XM Radio Inc., according to a Reuters report citing research firm CreditSights.
But rather than sending the company into bankruptcy, as previously speculated, Ergen may be better off to buy it as a going concern says CreditSights analyst Jake Newman.
"I think that [Ergen] is going to use whatever leverage he has and that includes a threat to put [Sirius XM Radio] into bankruptcy if he is really interested in gaining control," Newman said.
"I think he's fully willing to play his cards in as aggressive a fashion as possible and he has a good hand."
Pushing Sirius XM into bankruptcy might allow the company to make savings by canceling contracts that Ergen believes are too expensive - but this could backfire by disrupting current relationships, inhibit potential subscribers from paying for the service, and would leave the company's current management in charge, Newman said.
If Ergen were to covert the convertible debt at Sirius' share price as of last Thursday, when the WSJ first reported he had been bought the bonds, he would control around 40 percent of the company, said Newman.
"If Ergen swaps his debt for equity at current equity prices for face value, EchoStar would only have to buy another $125 million worth of shares, we estimate, to give him 50 percent," Newman said.
"Then he would be able to control the Board of Directors and replace management," he added.
[Reuters]
"I think that [Ergen] is going to use whatever leverage he has and that includes a threat to put [Sirius XM Radio] into bankruptcy if he is really interested in gaining control," Newman said.
"I think he's fully willing to play his cards in as aggressive a fashion as possible and he has a good hand."
Pushing Sirius XM into bankruptcy might allow the company to make savings by canceling contracts that Ergen believes are too expensive - but this could backfire by disrupting current relationships, inhibit potential subscribers from paying for the service, and would leave the company's current management in charge, Newman said.
If Ergen were to covert the convertible debt at Sirius' share price as of last Thursday, when the WSJ first reported he had been bought the bonds, he would control around 40 percent of the company, said Newman.
"If Ergen swaps his debt for equity at current equity prices for face value, EchoStar would only have to buy another $125 million worth of shares, we estimate, to give him 50 percent," Newman said.
"Then he would be able to control the Board of Directors and replace management," he added.
[Reuters]
I STRONGLY suggest you check the facts in here before you go posting this article. This is completely unsubstanitated. It incorrectly assumes all debt would be converted at the same time. Conversion of the February debt at today's price would be 1.5B shares. This would still only amount to 30% of the company.
IMO, this imformation is not accurate and highly irresponsible to post. Not one fact in this article is confirmed.
big assumption: assuming that they will do an equity for debt swap...
if, on the other hand, siri pays off the bonds, ergen comes up empty handed.
mel is not stupid...if mel rebuffed him late last year, there must be a reason...maybe he has the money to pay off the remaining bonds ergen just purchased.
Bye Bye Howie and Mel!
From the Reuters article:
"Depending on the rate of equitization of different layers of the capital structure, in bankruptcy he would need to spend at least $112 million at current bond prices to achieve hard control,"
What does this mean????
I would need to get at least 10 times smarter to understand half of what's going on here. Is there anybody out there that can crystalize this convoluted mess into something I can understand?
Wow, interesting article....as stated in others articles here. Looks like bankrupty or Ergen will take over. Now even if it goes into bankrupty, he will find a way to take over and contracts will become void (MLB, NFL, Stern). I might regret this but I wouldnt mind a change and see where it takes us.
Bring it on!
stupid question of the day: with all these talks...is it the right time to invest in a new XM Radio? I was thinking of buying an Inno....
Howard said yesterday he would not renegotiate. Howard goes, a ton of people go with him.
Bye Bye Howard Stern . There's $500,000,000 saved . Get rid of those exspensive , no better New York people , and bring in some people that know how to run a company . Also , get rid of Jon Zellner .
Is Nate Davis still with XM ? Haven't heard a thing about him , since the merger .
Wed., May. 10, 2006
Howard Stern:
“I’m very flattered terrestrial radio can’t let go of me,” Stern said Wednesday on his morning radio show. “But I would throw up if I had to go back. I’m never going back.”
“The story is I wouldn’t do it [terrestrial radio] for any reason,” Stern said. “Not for money. I left because I couldn’t stand the censorship. I couldn’t stand” the Federal Communications Commission.
Howard, no weaseling your way back, FM doesn't need you. However maybe if you got hired back for a realistic price your show could try to be as good as it was and (hasn't been since) the Channel 9 and KROCK days.
"Bye Bye Howard Stern . There's $500,000,000 saved"
Sorry but the vast majority of his payments were in stock which have already been paid.
he's not due another 500 million you fucking retard.
does not matter if they get rid of stern they will easly lose well over 2 million subs almost instantly and the stock will drop 50%...if its even possible anymore :P
good luck also getting him to renegotiate with all that money and regular radio willing to pay him millions...
Speaking of cutting expenses, would this also mean that "DishXM" would move operations from NYC and DC to EchoStar's corporate HQ and satellite uplink in Denver?
Considering that EchoStar runs out of an old shopping mall over in Littleton, it's not like they don't have the extra space...
"Is Nate Davis still with XM ?"
Mr. Davis left immediately after the merger was approved.
It hasn't been the right time since the merger was announced.
Dish has plenty of room at the state of the art Gilbert, Arizona uplink center.
Have a look here: http://www.satellite-sightseer.com/id/10603
@C
I was going to say the same thing. I pass by that building and all those satallites every day on my way to work.
Not only that, but SIRI would have not agree to the conversion; Ergen could not do that otherwise at this price. The article is misleading, to say the least.
I can guarantee you O&A and Ron & Fez go before Howard.
A bankruptcy would also void Howard's contract along with all of the others. So there would be some savings without him, but not much since he got his money pretty much upfront.
The big decision would be for the future. And the parameters of that decision would be clearly known this time (unlike when he first signed). Howard won't take less. So what it will cost to resign him will be clear. And it's fairly clear how many people came to Sirius just for him. So the lost revenue if he leaves will also be fairly clear to whoever gets to see the real books (and not the fairy tale subscription numbers that Sirius puts out).
A similar process will also apply to the sport contracts. Though, I'd guess that the NFL, MLB etal. would be much more open to renegotiations due to the uncompetitive nature of Satrad now.
Does anyone out there realize that there are speculations out there mentioned on today's Stern show that Ergen might want to pull a Gordon Gecco style takeover only to dismantle Sirius XM. They mentioned that Ergen might wsnt control of the repeaters and satelites. Word has it that a former major big wig at Sirius now is working under Ergen at Dish Network Echostar which gives Ergen inside information of how Sirius runs and how it's set up.
Whatever Ergen has in mind, he should NOT screw loyal Sirius and XM subscribers by dismantling the company. Take a peson like me who has 4 Lifetime Subscriptions to Sirius and 2 Lifetime Subscriptions to XM. We're talking about $2700 that I've dished out in Subscription Cost plus all the money I've spent on radios, boomboxes,homekits and Car kits and Custom Installation for my cars. Let's face it folks if you love Sirius and XM, you pretty much wnat it everywhere once you get used to having it.
If Ergen dismantles Sirius XM, it would be a disaster for peole like me who were loyal to the product since its inception. And I had both services!!!
Does Ergen realize how awesome it is to have radio coverage of EVERY sports event as well as awesome music channels commercial free?
The FCC MUST insist that Ergen not be able to break up Satllite Radio if he takes it over...
============
why is it,that the pest army of 5 are obsessed with howards bank account?
is it because you sheep have nothing to talk about because of the astronomical FAIL o&A have achieved in record time on both SAT and Terrestrial?
what have O&A achieved?a monster fail of Howards old markets and piss poor subs on XM..
"hoo hoo and baaaaaaaaaaaaaaaah"
You mean like how Sirius dismantled XM?