RSSCEO Mel Karmazin admits Sirius XM is in bad financial shape
By Ed Oswald | Published August 18, 2008, 6:48 PM
The satellite radio company's CEO told reporters this past week that the company had to accept less than favorable debt terms to close the merger of the two companies.
The US Federal Communications Commission approved the deal on July 25, and the company wanted to move quickly to avoid any potential delays related to court challenges of the merger.
Part of the problem was XM's $1.25 billion in debt, which needed to be refinanced in order to meet repayment obligations as part of the merger agreement. While XM had already raised $700 million towards that, the company still needed about $550 million more.
Karmazin was forced to accept higher yield rates -- as investors demand more to put money into so-called "junk bonds" -- on the following Monday evening, July 28, or wait it out for more favorable rates. Waiting apparently seemed like too much of a risk.
"I hated it," Karmazin told Bloomberg. "It was unfortunate, but we did it."
The result is going to be a massive amount of debt repayment in store for next year. According to Sirius, the company will owe approximately $1 billion in payments. However, the company plans to deal with it "sooner rather than later" so it can move forward.
Sirius XM will begin by making about $400 million in budget cuts in the next year, including eliminating duplicate executive positions. Karmazin has repeatedly spoken of the opportunity for significant cost savings when he was drumming up support for the deal in both the private and public sector.
i still think the company is in better shape merged than seperate. programming on sat radio is better than anything you will find on free radio. at least when you have a radio station that you tired of listening too when it starts repeating too much you have a chice of going to another one that has a fresh play list for you. I too hate the DJ's and when they take news breaks in between songs too about news no one cares about
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|As I have said before when you take two small poorly run companies that are in financial trouble and merge them, you just get one big poorly run company.
The problem was sort of touch upon by Hollywood- With the cost of DJs and the cost of Stern and Oprah, there is no way this company can make money based solely on a subscription financial model.
Have a nice day:)
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|If they would fire all the high priced "DJ's" that no one cares about, they could actually make some money.
How hard is it to have automated machines play music and uplink it to a satellite? They play the same lists three to four times a day sometimes. I was in Orlando and our rental had XM, so I put on channel 82 (the System). We heard the same songs every time we went to Sonic for some late night extra long chili coney dogs.
It was pathetic how many times they repeat the playlist in a single day. I have Sirius but I can't remember the last time I listened to it. Luckily it's a house account and I don't have to pay for it.
(Yes, I can activate Sirius and XM for nothing using the dealer numbers from the place I use to work at. You just tell them it's a working display model for your store.)
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|It would seem that the most logical path would be to totally automate the system and to run as lean as possible - possibly with additional pay per view interspliced programming such as races, etc - assuming such support is present.
I don't think there is sufficient savings in simply combining the duplicated production facilities to offset the loses.
We'll see. But I am not optimistic.
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|Too bad nonetheless. We were planning on signing up for Sirius couple of years back for our cross-country trip, never did in the end. My father-in-law loves it for the Comedy channels. Be sad if it dies..
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|I laugh at all the loser Howard Stern fans who bought there stock when he joined. Howz that working out.....
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|It's worked out great for me. When he signed I bought 20k shares at 3.34. Sold at 8.96 in December of that same year(2004) for a cool profit of $112,400. Not bad when you can almost double your investment. Couldn't have worked out any better.
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|Howabout the fact that Howard called anyone who didn't signup for Satellite radio to listen to him are a bunch of losers. I wonder if the jerk still thinks that...
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|How did that capital gains tax work out for you Ronton? Something like 40%?
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|This is old news. Why do we get negative news items repeated so often. I would say, wait until March and see what transpires instead of listening to all this doom and gloom.
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|The new company will be fine. I have faith in Mel Karmazin.
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|I fear they are going to go down the tubes.
Even a merger is not going to substantially reverse the basic general trend that simply does not favor pay radio.
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