Charlie Ergen offered to restructure Sirius XM Radio Inc. debt and inject several hundred million dollars into the company in return for control, according to the Wall Street Journal. The overture, as we now know, was refused late last year, but still remains on the table.
While Mel Karmazin and Charlie Ergen, two long-time media heavy hitters, are still in negotiations over the deal - Sirius XM has given no indication that it is prepared to accept the offer, reports WSJ.
Additionally, the Journal reports that Ergen's plan doesn't involve buying out existing shareholders - something many investors had been hoping for.
A Sirius XM bankruptcy filing would wipe out SIRI shareholders and expose management to litigation if they filed for bankruptcy in the face of an offer that would preserve at least some of investors' equity.
But if Karmazin can't raise the $175 million due next Tuesday, which it owes to EchoStar as part of $400 million that it controls, bankruptcy might be the only option.
Of course, Ergen doesn't want Sirius XM Radio to file for Chapter 11. So this move could be a forceful effort to prod EchoStar into offering better terms.
It should also be pointed out that the hiring of bankruptcy and restructuring advisers - which the Wall Street Journal says occured "several weeks ago" - does not mean a bankruptcy filing is imminent.
[Wall Street Journal]
Additionally, the Journal reports that Ergen's plan doesn't involve buying out existing shareholders - something many investors had been hoping for.
A Sirius XM bankruptcy filing would wipe out SIRI shareholders and expose management to litigation if they filed for bankruptcy in the face of an offer that would preserve at least some of investors' equity.
But if Karmazin can't raise the $175 million due next Tuesday, which it owes to EchoStar as part of $400 million that it controls, bankruptcy might be the only option.
Of course, Ergen doesn't want Sirius XM Radio to file for Chapter 11. So this move could be a forceful effort to prod EchoStar into offering better terms.
It should also be pointed out that the hiring of bankruptcy and restructuring advisers - which the Wall Street Journal says occured "several weeks ago" - does not mean a bankruptcy filing is imminent.
[Wall Street Journal]
Does everybody think that Mel might have an attitude/ego, and if he takes the Ergen deal will basically be admitting defeat? Maybe that's why he doesn't want to make the deal. Maybe it's just me, but if it were me i'd rather make the deal then dive into bankruptcy, which would hurt many, many people.
Mel, just swallow your pride and take the deal. You know that Howard Stern is definately nervous, because he's been talking about it this morning often.
I really think this is a power struggle between two key media giants that has the shareholders in the crossfire. Surely Mel cant be foolish enough to allow BK over allowing someone else to run the company. Mel stands to lose some 2.7 million dollars in a BK of siriusXm. I dont know that im comfortable with someone else running the company but id rather see that than a BK. Noone stands to win in a case of BK. We know sirius Has the cash on hand to pay the 175 million dollars as well. This is something that noone seems to be pointing out. SiriusXm had 365 million dollars at the end of last Novemeber. Are they playing a game of chicken up to the last minute and then if it doesnt work they make the payments and go on? This is crazy to say the least.
The problem is, Mel might know exact reasons for this offer--Ergen could want control of company so he can cherry pick off assets he wants--which are worth more then the amount he assumed, suc as repeaters, sats, spectrum--Once done, he can file for bankrupsy and walks away with what he wanted for pennies of their value--Kinda like Gordan Geico--Mel, knowing what he wants, doesnt want to give in---but really, who the hell knows at this point since sirius is so good at communicating with their investors--Come to think of it, i still havent gotten any emails, solititations from Sirius regarding their price increase, lock in offer etc. I only heard about it on the blogs--Pathetic
All Mel is doing is hurting himself and the company... MEL DO ME A FAVOR AND TAKE THE GOD DAMN DEAL DO NOT FORCE BANKUPTCY!!!
collusion:
: secret agreement or cooperation especially for an illegal or deceitful purpose
Mel and Ergen. (bandwidth)
Mel could get out of this, but they will make it seem like they "had" to do it...
From Barrons:
Sirius XM Holders, Charlie Ergen Is Not Your Friend
Posted by Eric Savitz
Sirius XM (SIRI) shares are going to open sharply lower this morning following the New York Times report that the company is preparing a Chapter 11 filing. The Wall Street Journal has followed with its own report on the situation, noting that Dish Network (DISH) and EchoStar (SATS) CEO Charlie Ergen has offered to restructure the company’s debt and inject several hundred million in capital in return for control. But here’s the kicker from the WSJ story, Sirius fans: “Ergen’s plan doesn’t involve buying out existing shareholders.”
In other words, the current options for Sirius appear to be either file for bankruptcy, an option which would likely wipe out the existing holders, or cut a deal with Ergen for terms that also would leave holders with nothing. The story recounts the difficult situation: if XM can’t raise $175 million by February 17 to repay bonds now held by Ergen, the company will likely be forced to go bankrupt. The WSJ also notes that Echostar controls a $400 million tranche of Sirius debt that matures in December.
The depressing bottom line for holders, as I have noted previously, is that Ergen might save the company, but he is not likely to save the day for the company’s remaining holders.
SIRI this morning is down 4 cents, or 38.5%, to 7 cents.
BK or deal... Shareholders will loose everything.
Mel IMO will not let go.. he would rather screw all investors, go BK, re orginize, then give himself a huge amount of shares for doing such a "good Job".
told ya all I did not want Mel or a merger
GO TO HELL MEL
howie ruined everything
There are two issues: shareholders and listeners. For the shareholders, it's over, regardless. Those of us who got out when the XM stock was high ($40 for me), we did OK. For listeners, there is still a chance that some form of SiriusXM will continue to be broadcast. I think that this is where the focus must be....sorry to those still holding stock...
"We know sirius Has the cash on hand to pay the 175 million dollars as well. This is something that noone seems to be pointing out. SiriusXm had 365 million dollars at the end of last Novemeber."
They had 365 Million as of the end of Q3 which was September. They were also burning through about 200 million a quarter. Even lowballing that number to 150 million would put that down to 200 million at the end of Q4, and just 50 million at the end of Q1 of this year. If they borrow any more money, then the debt that matures in December becomes due NOW instead.
So no, they don't have the cash. And if they did, they need it to operate through the end of next quarter, not pay off debt. This company was slated to continue losing money until the end of this year, and what little cash they have on hand was supposed to get them to that point.
Sounds like Mel and the mayor of my town have something in common. Both have huge inflated egos, are completely stubborn, and will basically do whatever they want.
mnx,
You are flat out wrong. Srius stated in December that there would be $100M LESS in losses for the year as a reult of Q4. That's postive money coming in. They stated that they were breakeven on costs (or close to it). They are not bleeding $200M.
I could see Karmazin shuttering satellite radio as a medium just to prove a point. He destroyed XM just to prove a point -- why stop there? Why not just dismantle the whole thing and really teach everybody a lesson.
Forget Mel's ego for just a minute, step back and think....where is the board of directors on any of the issues? Are they paid like the top bank's boards to just sit back and color?
@ xcountry: ..You got a few issues huh? Tell us all how you really feel..
XM was DOA anyway. If you want to be mad at someone, blame the politicians (Democrats) and the NAB for holding up the merger.
Then blame Bush (Republicans) for the recession and the Iraq war that costs $15 billion/month (on credit btw..) that started this whole mess of an economy..
You can't blame this on Karmazin.. Buy a car or two and turn on some subs..
Everyday another corporation is going under..
Had the merger been approve within the FCC 90 day period, like 99.99999 % of all other mergers AND the economy was still rolling along SiriuXM would would be shitting in tall cotton.. If my aunt had balls she would be my uncle.. Shit happens.
I am sure Karmazin is doing what is best for SATELLITE RADIO.. NOT xcountry.. Get it??
If you want to be mad at someone, blame the politicians and the NAB for NOT holding up the merger and allowing a illegal MONOPOLY to form. If you want to be mad at someone, blame xm's management for folding and letting Mel completely kill xm. If you want to be mad at someone, blame Melvin Alan "Mel" Karmazin he lied to everyone and even now some still haven't been able to accept that bit of reality.
@Mrwirez you said... "You can't blame this on Karmazin.. Buy a car or two and turn on some subs..
Everyday another corporation is going under.."
This is part of the problem and is one of the reason the company is going under.
Mel himself is quoted as saying "people should be glad they get what they get and not cancel because they want to see us survive"
Why should people pay for CRAP?
The product is not the premium radio service it once was. Instead it is now a homogenized version of FM Radio. People are paying for satellite radio to get away from FM Radio, yet now they are being force fed the same crap that FM radio gives.
Get rid of the 200 song playlists and go back to the channels which had playlists of thousands of songs.
Bring back the channels you could only hear on Satellite Radio.
Get rid of the single artists channels.
And finally stop expecting me to shut up and accept crap and pay my bill just so the company don't go out of business.
The ability to speak with your wallets is the most powerfull tool us consumers have. Use it wisely and don't pay just to get fed crap.
Now with that said, knowing Charlie Ergen I believe he intends to keep satellite radio alive and hopefully he brings it back to its glory days.
Remember former CEO Joe Clayton is on the Echostar board of directors as is other former Sirius employees.
Remember all debt aside, Satellite Radio IS making 2 billion dollars a year. With the debt gone it could live a long long time.
Don't think that satellite radio is dead yet because its not. But don't feel abliged to crap eaither. Speak with your mouths, your hands and most importantly your wallet.
"I am sure Karmazin is doing what is best for SATELLITE RADIO.. NOT xcountry.. Get it??" How naive is that?
Melvin Alan "Mel" Karmazin is doing what is best for Melvin Alan "Mel" Karmazin and for no one else. With Melvin Alan "Mel" Karmazin it's all about ego and arrogance. He is the one who hurt FM, he is the one who killed XM, and he is the one who has killed satellite radio.
20 million subscriptions is proof that a market exists for non-terrestrial radio. That's nothing to be sneezed at, and even if this goes under, the fact is that market will be waiting for SOMEbody to serve it. Whether it's in the form of satellite radios and Sirius/XM as we know them, some kind of cellular streaming (see Slacker on Blackberry), a new technology (mobile wi-fi?) or even the implosion of the REST of the radio industry (which is also just as imminent), somebody's going to figure out a way to serve the market.
It may take longer thanks to the overall economic situation, but it'll happen.
One other thing: remember that a lot of companies went under at the end of the first dot-com wave. Why? Because a lot of those companies had to lay the infrastructure of the internet itself -- an enormously expensive proposition that, with a few exceptions (eBay, Amazon), usually results in those first wave of companies going under because they simply couldn't stick around long enough to make their capital outlay back. But, the infrastructure they installed was there, and it paved the way for others to come online and make money and provide various services that we enjoy today.
I think that's the case with Sirius/XM. The satellites won't go anywhere. The radios won't go anywhere. The market remains. It may likely take another company -- EchoStar? Sony? Google? Someone not on the radar? -- to take that infrastructure and provide the content that will keep the market happy.
So as a listener, I'll wait and see what comes next. Because something WILL come next, and there will be money to be made -- and made much more easily -- than what's here now.
It's the free market way!
The huge contracts signed by both XM and SIRI during the content war pretty much doomed them, and the merger didnt help.
Regardless, it is what it is, and the shareholders are going to be wiped out either way. Maybe after Ergen takes it over, in bankruptcy IMO, he can renegotiate the expensive content, get rid of the useless stuff like NBA, NFL,MLB, Oprah, and Stewart, accept that Stern is tired and wants to retire, and just go back to basics, deep playlists, news, some sports, and some entertainment. Charge 10 dollars a month.
He will likely come back to market after bankruptcy with new shares to issue, maybe it will be worth looking at.
Ariel
Sorry guys, but I hope Sirius goes belly up.
Nowhere else to go after they completely ignore subscriber
complaints regarding their glorified FM programming.
I say get rid of programmers like Jon Zellner who don't care what
their subscribers think and bring in a company that will (as has
been said above) return satellite radio to its glory days.
No one seems to want to speak for just the listener. Everything is about the investor. WHO CARES? I am, god forbid, a customer.
Mel, Charlie, both of you, save the company and save it the exact way it is (including MLB, NFL, etc) and that will be good enough for me. I'll even pay more for it!
All this talk of Ergen getting control and then repurposing the satellites and repeaters for some other medium is nonsense. The spectrum, satellites and repeaters are only licensed by the FCC for satellite radio. No other application is permitted no matter who owns the assets. Charlie is well aware of this and intends to keep things going but at much lower operational costs. It will be virtually impossible to get the FCC to permit any other use except DARS (Digital Audio Radio Service). He already has in place significant resources in customer service, broadcast operations, R&D, manufacturing, advertising , marketing and retail distribution that he can bring to the table to keep costs low and maintain a reasonably good level of service and subscriber satisfaction.
Shareholders should send a clear message to Mel K that we won't put up with this unnecessary loss and should either join a class action (save sirius) or protest in front of Mel's apartment building and his CT home to let him know we won't take this sitting down,
The ONLY reason the FCC delayed their decision to approve the merger is because of Howard Stern. We all remember Howard blasted the FCC on a daily basis on FM. For what? Is his show on Sirius any better now without the threat of FCC fines? The FCC's had everything to gain and nothing to lose by delaying their decision.
Why do you think the FCC finally approved the merger anyway? I suspect it is because of the pressure Jim Cramer (and Howard) put on the FCC Board: Jim said on his Mad Money show that if the FCC doesn't approve it, he and his fans and especially Howard Stern's fans will start exposing and protesting each member of the Fcc Board.
They didn't want that scrutiny. Nor will Mel. So speak loudly. Let Mel know he MUST protect the shareholders or we'll take action by protest and boycott of any firm that hires Mel in the future.
One thing I just don't understand:
Mel Karmazin appeared on Jim Cramer's Mad Money show immediately after the merger. Jim said that it is safe to assume that the arbitrage bondholders will join all the other shorts and why wouldn't they, they want to protect their investment? Mel responded, well, they'll see and when the sp takes off, the shorts will all lose their shirts.
What was Mel thinking?
Bondholders were given the option to convert their bonds to shares to short the stock so that the Share Price never goes above $3.00. The price point at which they can redeem their bonds for cash. that is why they short the stock with the same value as the amount of the converts they hold to protect their investment
So naturally, following the approval of a merger, one expects the share price to skyrocket. In this case, the Bond Holders shorted it down to 10 cents all in an effort to protect their investment. Why didn't Mel just back out of the Merger deal?
Did Mel have to offer that option to secure financing to complete the merger? Wasn't there another way to finance the deal?
So Mel, how are the shorts losing their shirts now? Oh, wait, maybe Mel meant to say the shorts along with all Shareholders and even the subscribers will all lose their shirts?
If they go bankrupt just cancel your subscription and they all can keep the floating crap in the air.
Everyone is over analyzing this...
"Its the economy stupid"
@Mrwirez: "Its the economy stupid"
Also known as "People aren't going to pay for stuff they can get otherwise for free (i.e. Slacker, Pandora, LimeWire, BitTorrent, etc.)".
"mnx,
You are flat out wrong. Srius stated in December that there would be $100M LESS in losses for the year as a reult of Q4. That's postive money coming in. They stated that they were breakeven on costs (or close to it). They are not bleeding $200M."
No, you are either flat out wrong, or just plain ignorant.
Mel has stated time and time again that Sirius would NOT hit cash flow break even until the end of THIS year. There might be 100M less of a loss in Q4 due to synergies, but 200M-100M is still 100M loss.
If Mel really had the money to pay off the debt, he would have done it by now. He doesn't have the money, and even if he did, he is smart enough to know that whatever cash is on hand is absolutely needed to keep making up the difference between revenue and expenses.
Mel has been, and will be continuing, to pay all the staff that was laid off in November. The severence packages were 6 months long. Mel has been honest (as long as you read between the lines) in saying that the synergies from this merger wouldn't even begin to be realized until this year. NO WAY Mel was able to cut costs and increase revenues as much as to make a 100M profit in the 4th quarter. Not a chance.
If the news was good, we'd be hearing the results right now. We would know what they made last quarter. The results are not good, so Mel doesn't want to tell anyone until he can figure out how to cook the books this time. Case in point, Friday marks the halfway point for Quarter 1. So we are halfway through the quarter, where are the financial results from Q4?
Better yet, where is Mel to quash the rumors of bankruptcy? Thats right, your hero is cowering waiting for the court papers to be filed, knowing that he will soon be out of a job.
"Everyone is over analyzing this...
"Its the economy stupid""
I'm tired of hearing that excuse. Yeah, the economy sucks. Yeah, its probably making things a bit harder. But healthy companies are not filing Chapter 11. Companies on the brink already, like Circuit City was, or Linens N Things was, or Muzak was, or Worldspace was, are filing bankruptcy.
In a healthy economy the situation would be the same. The differnce is, Mel might have been able to hold them off til December to file bankruptcy.
Everyone relax, I just paid my bill. This is all going to blow over.
Mrwirez, there are people on here saying "go to hell Mel," and you tell me to tell you how I really feel? Others are doing a better job, it would seem.
Also, I think perhaps you are the one who didn't "Get it??" Nowhere in my post did I blame Mel Karmazin for the impending bankruptcy. As you so aptly point out, it probably would have occurred regardless.
What I did say -- and I think there's ample justification for this -- is that the company is being run by a man that I could believe could prefer going out of business entirely rather than letting someone else take it over. I say that because he had promised to "destroy XM," and he has delivered on that promise, despite the fact that XM brought more subscribers and revenue to the table than his company.
I also say that because he is largely responsible for the bidding war for personalities and programming that resulted in both services recklessly overspending for stuff that most people don't even want to listen to.
Also, your statement that the FCC has rubber-stamped "99.99999 percent" of all other mergers is uninformed and untrue. In the first place, most other mergers were not between two companies that, as an explicit condition of their initial licensing, both agreed NOT to merge, as was the case with Sirius and XM. Second, the FCC does not preside over most mergers, now that radio and TV ownership is essentially unrestricted, so the Sirius-XM merger alone would surely pull that number of delayed merger approvals well below 99.99999 percent.
And as far as the statement that Mr. Karmazin is doing all he can for satellite radio, it's hard to see much justification for that, but you have a right to that opinion. But what would have been better for all of us listeners would have been to allow both companies to file bankruptcy separately, since they'd both have continued operating, and as listeners we'd still have a good service, XM, rather than the lousy one we have now. But I hold no personal animus to Mel Karmazin; I don't know the man, he may be a great guy. I just don't like what he has done to the satellite radio service I once liked.
The main problem with Companies in debt like this is the one that starts at the top and has a trickle down effect: CORPORATE GREED.
Their stock is currently worth 7 cents a share. It went as low as 5 cents the other day. HOW THE FU** does Mel still have a job???? HOW???? Hey boardmembers: THIS IS YOUR FAULT!!! You could have ousted this incompetent a long time ago. But, you didn't. Now, he shamelessly is hanging on for dear life. Someone, please, find a Vaudeville Cane and use it! Mel's act is long over!!!!