Is Sirius XM circling the drain?
Sirius XM (SIRI) is racing to get its financial house in order before a meeting with restive shareholders scheduled for Dec. 18.
As chief executive officer of a company whose shares have plunged more than 85%, to 14¢, in the past three months, Mel Karmazin needs to refinance debt and demonstrate he's reining in expenses while convincing shareholders to back a reverse stock-split measure aimed at keeping the company from being delisted from the Nasdaq stock market in the coming months.
Some investors are dead set against the move, which involves the issuance of more shares as well as a reverse split that would boost the value of the stock to a level acceptable to Nasdaq. "I just don't feel there's been enough discussion about why it's needed," says shareholder Michael Harradine, who voted against the reverse split. Another shareholder, Michael Hartleib, who's coordinating the efforts of more than 1,000 individual Sirius shareholders, plans to vote against the reverse split at the meeting.
A bigger hurdle for cash-strapped Sirius XM will be refinancing $1 billion in debt that's coming due in 2009, including $210 million in February. In recent weeks the company retained investment bank Evercore Partners (EVR) as a financial advisor to help in the effort, according to Debtwire, a financial news service. Representatives of Evercore and Sirius XM declined to comment on the report.
The company is also under pressure to reduce operating costs. Sirius XM may need to negotiate for a lower price on some of its programming agreements. The company pays $60 million a year to broadcast Major League Baseball through 2012, for instance. "They made a mistake in their programming contracts," says Paul Gallant, senior vice-president at investment advisor Stanford Group. "It's like an albatross around their neck." A reduction in revenues Sirius XM shares with auto manufacturers like General Motors (GM), which install satellite radios in cars, could help shore up finances, too. BusinessWeek