Orbital Decay - Part Two

It's called vig

After running up a huge tab for talent and access Sirius and XM begged to merge, and they got what they wanted, which has not stopped management from driving the company into a cash flow ditch. But what about that 220 million dollar contract with the NFL? Surely the terms are flexible, I mean the NFL must be willing to work with a trusted and troubled partner to do what's best for football, right? ...Right? The Curly R concludes its two part series on the disastrous Sirius-XM merger and its impact on the NFL.

Part One: Mismanagers In Space
Part Two: Whew, Looks Like the NFL Will Be Ok
Footnote: My Letter to the Federal Communications Commission
Follow up: The Liberty Media Bailout

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Given the economy and the precarious state of Sirius XM, either a hostile takeover or bankruptcy sure to happen in the next week, it was with amusement that I read a piece in the New York Times Friday about how MLB and the NFL are going to be just fine thanks no matter what happens to Sirius XM because in their broadcast contracts the leagues smartly required the original companies, XM with MLB and Sirius with the NFL, to place future rights fees in escrow to guarantee funds availability at the time payment was due.

So that means right now the combined Sirius XM company has at least 185 million dollars, 65 mil for the NFL and 120 mil for MLB, in escrow accounts so these two major sports leagues can get paid, even as the firm goes into the tank and shareholders lose everything. That money, were it available would go to good use, specifically to pay bond holders whose next big 300 million dollar tranche of debt comes due on Wednesday.

If the company cannot renegotiate the debt, which is doubtful since the guy that bought it, Charles Ergen of EchoStar is the one that wants to take over the company and like a vampire suck the spectrum out of the business and repurpose it to mobile video meaning the near certain end of satellite radio as we know it, or find new equity investors to pump cash into the venture, then we are looking at difficult future for the company with its viability as a going concern in full doubt.

Yes I know companies do this stuff all the time, put big money in escrow, it is just amusing to me that XM borrowed 62 million dollars last year so they could squirrel away MLB's full rights payment, adding to the company's poor capitalization ratio and now the company may go under even as checks to the NFL and MLB will continue to get mailed, no more broadcasts and shit let the employees go, break as many other contracts as you can and screw your suppliers, baseball and football needs to get paid.

Somehow this situation is reminding me of the time the vice president shot his friend in the face and the friend with the face full of bird shot then went on television and apologized for causing the veep any problems.

I wonder if those contracts and that escrow money will be safe if Sirius XM goes into bankruptcy. One thing I do no know for sure, Mark Newgent is right, if Sirius NFL Radio goes off the air I may wind up in a hospital.



Imaginary Sirius XM combined logo from here.