Liberty Media Corp Call to Discuss Acquisition of Sirius XM Holdings Inc
Jan 03, 2014 AM EST
FWONA - Liberty Media Corp
Liberty Media Corp Call to Discuss Acquisition of Sirius XM Holdings Inc
Jan 03, 2014 / 10:00PM GMT
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Corporate Participants
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* Courtnee Ulrich
Liberty Media Corporation - VP, IR
* Greg Maffei
Liberty Media Corporation - President and CEO
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Conference Call Participants
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* Barton Crockett
FBR Capital Markets - Analyst
* David Joyce
ISI Group - Analyst
* Amy Yong
Macquarie Research Equities - Analyst
* Jason Bazinet
Citigroup - Analyst
* Ben Swinburne
Morgan Stanley - Analyst
* Bryan Kraft
Evercore Partners - Analyst
* Kannan Venkateshwar
Barclays Capital - Analyst
* James Radcliffe
Buckingham Research - Analyst
* John Tinker
Maxim Group - Analyst
* Tuna Amobi
S&P Capital IQ - Analyst
* Sachin Shah
Albert Fried & Company - Analyst
* Brian Shea
Wells Fargo Securities - Analyst
* Zach Miller
Three Peaks Capital - Analyst
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Presentation
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Operator [1]
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Good day, ladies and gentlemen, and welcome to the Liberty Media conference call. Today's conference is being recorded. I will now turn the conference over to Ms. Courtnee Ulrich. Please go ahead.
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Courtnee Ulrich, Liberty Media Corporation - VP, IR [2]
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Thank you, and thank you all for joining us on this Friday afternoon. Before we begin, we'd like to remind everyone that this call includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about the proposed acquisition of the shares of Sirius not currently owned by our Company, the issuance and trading of our Series C common stock, anticipated benefit of the proposed transaction, and other matters that are not historical facts.
These forward-looking statements involve many risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements, including, without limitation, our ability to negotiate definitive transaction documents with Sirius, our ability to complete the proposed transaction, our ability to complete the distribution of our Series C common shares, the ability of the combined companies to realize the expected benefits of the proposed transaction, regulatory issues, and general market conditions.
These forward-looking statements speak only as of the date of the call, and we expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in our expectation with regard thereto, or any change in events, conditions, or circumstances on which any such statement is based.
On today's call, we may discuss certain non-GAAP financial measures, including adjusted OIBDA. The required definitions and reconciliations can be found under the Investor Relations section of our website. And with that, I'd like to turn the call over to Greg Maffei, Liberty's President and CEO.
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Greg Maffei, Liberty Media Corporation - President and CEO [3]
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Thank you, Courtnee, and thank you to all of those on the line for joining us on a Friday afternoon.
So just to review what we are proposing to do in this transaction, we will exchange newly-issued Liberty C shares for the remaining outstanding stock of Sirius, that the public holds. Immediately prior to the exchange, we will dividend out the C shares tax-free to our current Liberty holders, at a ratio of 2 new C shares for every A share or B share.
The exchange ratio of Liberty to Sirius is based on the relative trading over a specified period of time, 90 days, and before the dividend, pro forma before the dividend, rather, is 0.076, and prior to the dividend is 0.0253. And based on today's close, that's a 3.1% premium, but if you look at yesterday's close, for example, it's a 4.5% premium. But we really looked at it as an effect of where we traded with them over the last 90 days.
This deal, obviously, is conditioned upon the approval by Sirius' Special Committee. If their Special Committee doesn't approve the deal, we are not going to go forward with it. And also, by a majority vote of the minority non-Liberty Sirius shareholders, and we wouldn't go forward without their approval, as well.
Liberty's shareholders will have to approve the issuance of these C shares to the Sirius shareholders, because we're issuing more than 20% of our stock, as required by the NASDAQ rule. Post-close, Sirius will hold 48.6% of the C shares, therein 39% of the new Liberty total equity market cap, based on today's close. I would note, this change of control, we already control Sirius XM, nor is it a minority squeeze-out, because the Sirius shareholders are going to receive equity, in which they are the largest piece, and they'll continue to benefit from the upside of Sirius XM.
So why are we doing this? What's our rationale? First is, we want to simplify our capital structure and have a [tariff]-only structure, that will eliminate some ambiguity around our long-term relationship between Sirius and Liberty.
We also think it increases our financial flexibility, and strategic flexibility. Mind, this is our capital structure. It allows the Sirius shareholders to benefit from capital deployment, and organic and strategic investments and return of capital across the whole Liberty portfolio. We believe it will enhance Liberty's access to capital to support the pursuit of other potential attractive investment opportunities. It aligns our management and the Sirius XM management more closely, and recognizing that they are nearly 70% of our proportional value.
And as I noted, it's neither a change of control or minority squeeze-out. All it does is move the Sirius XM shareholders from the position of a non-controlling economic stake at the sub level, to a similar non-controlling economic position in new Liberty at the parent company level.
So those are some of the reasons we think it's attractive, and we also think it will be attractive, similarly, for our shareholders to have access to the Sirius XM cash flow. To optimize, as I said, the combined capital structure, and to be able to pursue other economic opportunities.
I would note a couple of things here, that because of the issuance of those Cs, the new Liberty pro forma to equity market cap will be $27 billion, and that will be a very liquid share holding, a very liquid stock, and one we think will trade very well. So with that, I'm happy to open up to questions, if there are any.
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Questions and Answers
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Operator [1]
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(Operator Instructions)
Barton Crockett, FBR Capital.
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Barton Crockett, FBR Capital Markets - Analyst [2]
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I'm curious about your ambitions for share repurchase. We've been assuming that Sirius could do a lot of share repurchase.
Now that they will be combined with Liberty, you have had share repurchase, but other uses for cash. Do you sense that there will be any change in the combined entity's appetite for share repurchase, should this go through?
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Greg Maffei, Liberty Media Corporation - President and CEO [3]
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I think Liberty has always been in the return of capital business, and done that effectively. If you look at Liberty parent, since we created this separate Liberty Capital, which became Liberty Media, I think that we bought back something like 52% of the Company. So I suspect there will continue to be a significant amount of return of capital, given the high free cash flow generation at Sirius.
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Barton Crockett, FBR Capital Markets - Analyst [4]
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Okay. But it sounds like you're also interested in having strategic flexibility to use cash for other things.
We've spoken a lot about the Charter investment and things in cable. Could this be potentially -- enhance the source of cash flow, ambitions in the cable industry?
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Greg Maffei, Liberty Media Corporation - President and CEO [5]
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Well, I think one of the things you would know, Barton, is we have been lucky enough to see a bunch of attractive investment opportunities, not only at Sirius, but across the Liberty portfolio. For example increasing our investment in Live has turned out very well. Investing in Charter has turned out very well.
And frankly, being able to utilize that cash flow, not only for share repurchase, but for other equally interesting or potentially even more interesting alternatives, is something that we would ask shareholders to have belief in the Liberty management team, and point to the track record we generated, and why this would -- if we converted some of the cash flow, and decided to use some of the cash flow for investment opportunities, it was because we thought there was pretty attractive investment opportunities. But we are not committing to X amount of capital for new deals or X amount of capital for share repurchase. I would just note that we have done an awful lot of share repurchase.
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Barton Crockett, FBR Capital Markets - Analyst [6]
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Okay. One final thing, just to make sure I get some facts straight, can you update us on how many shares of Sirius Liberty currently owns, and what would happen if this -- with the remaining $500 million share repurchase agreement? I think you have executed some of that in November?
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Greg Maffei, Liberty Media Corporation - President and CEO [7]
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Right. So we're a little over 52% of the Company.
And we have asked in our letter that they curtail -- I think they bought back $160 million of the $500 million, we asked that they curtail -- the company, Sirius XM, curtail the share repurchase of the remaining portion of the $500 million until we resolve on these issues, in the letter today, the offer. They are under no obligation to do that, but we've asked that they do it.
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Barton Crockett, FBR Capital Markets - Analyst [8]
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Okay. Great. Thank you.
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Operator [9]
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Vijay Jayant, ISI Group.
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David Joyce, ISI Group - Analyst [10]
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This is David Joyce for Vijay. I was wondering if you could put some timeframes around the various stages from here, in terms of what you think the Sirius Special Committee might get back to you, all the steps in the process?
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Greg Maffei, Liberty Media Corporation - President and CEO [11]
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Yes. Obviously I can't tell you when they're going to get back to us, because that's really in their business, but all indications are that they're well along way in terms of forming a Special Committee and moving the process along, and I think it's -- all of us would agree it's in our interest to move in a timely business, but we'll see, because there inevitably is some give and forth in the negotiation. We'll see how long that takes. And once we have an agreement with them, obviously, it will take -- as we noted both sets of shareholders, which should take something like 90 days after the agreement is reached until a close.
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David Joyce, ISI Group - Analyst [12]
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Thank you. And in your contemplation of the Series C stock, would that be a non-voting class as has typically been the case with other Liberty-related entities?
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Greg Maffei, Liberty Media Corporation - President and CEO [13]
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Yes. That is our anticipated results for the Series C.
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David Joyce, ISI Group - Analyst [14]
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All right. Thank you.
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Operator [15]
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Amy Yong, Macquarie.
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Amy Yong, Macquarie Research Equities - Analyst [16]
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Just a couple questions. First on liquidity, can you actually clarify pro forma, offer the transaction with the liquidity available to Liberty to make additional investments is, between just liquidity available at Sirius XM, and then also Liberty?
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Greg Maffei, Liberty Media Corporation - President and CEO [17]
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Well, I don't think there's a bright line number on that, but because Sirius in our minds has significant borrowing capacity, it also has significant free cash flow generation. And then Liberty has other assets that it could choose to divest or borrow against. But let's just say we believe we will have plenty of firepower.
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Amy Yong, Macquarie Research Equities - Analyst [18]
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Okay. And then following up on the margin loan that you have against Sirius XM, can you walk us through what the impact of that is, with this transaction?
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Greg Maffei, Liberty Media Corporation - President and CEO [19]
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Well, we would obviously either need to find incremental collateral from other sources or arrange some other kind of financing to take that margin loan out.
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Amy Yong, Macquarie Research Equities - Analyst [20]
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Got it. And then last question for me, Sirius XM clearly has a huge massive NOL position. Any ideas on how to unlock and how to create additional value with that NOL?
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Greg Maffei, Liberty Media Corporation - President and CEO [21]
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Well, I would say that Sirius XM is doing a very good job of utilising that NOL itself by being quite profitable, something, a condition it wasn't obviously several years ago, but is now doing very well against. But you're right, to the degree that we had other earning assets that could bring the present value of that NOL forward, that has some incremental value to us, but I don't think that's enormous.
If you look at most of the other consolidated assets inside of Liberty, they're not generating significant operating income, so they wouldn't be offsetting that NOL. We do have gains, capital gains, that we could use to offset, but that probably wouldn't be our first choice for the most appealing. We'd like to find other ways to do that, so I don't think, this isn't being driven by the use of the NOL by any means.
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Amy Yong, Macquarie Research Equities - Analyst [22]
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Okay. Thank you.
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Operator [23]
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Jason Bazinet, Citi.
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Jason Bazinet, Citigroup - Analyst [24]
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Do you think investors that are following the Charter, Liberty, Time-Warner sort of saga should view this transaction as a gating factor? In other words this has to close before anything else can happen? Thanks.
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Greg Maffei, Liberty Media Corporation - President and CEO [25]
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I don't think they have to view it as a gating factor. I think there are a lots of ways that something could occur there, but I would note even if you look at the timeframes discussed here, and you assume some reasonable timeframe on anything that Charter was able to do with Time-Warner, it's likely that would close significantly later than the transactions contemplated here.
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Jason Bazinet, Citigroup - Analyst [26]
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Okay. Thank you.
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Operator [27]
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Ben Swinburne, Morgan Stanley.
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Ben Swinburne, Morgan Stanley - Analyst [28]
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Couple questions. Going back to the NOLs, Greg, is there a timeline here to access these for capital gains? I know you've already talked about the fact that wasn't super interesting, but I believe -- (multiple speakers)
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Greg Maffei, Liberty Media Corporation - President and CEO [29]
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Some people might do that -- I don't think that would be our appeal, because we have generally found other ways to not recognize those gains, and utilizing those NOLs, which will be consumed quite quickly by Sirius XM's own profitable operations. I don't think that's likely to be where we would go.
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Ben Swinburne, Morgan Stanley - Analyst [30]
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Okay. And this is probably an odd kind of asking a question about actually sitting Sirius, but I wanted to ask about reverse RMT. At RMT, is there -- you guys have split out wholly-owned assets in the past before.
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Greg Maffei, Liberty Media Corporation - President and CEO [31]
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Sure. I would suggest this is not -- it would seem unlikely that the next step would be to do an RMT but nothing being done today would preclude an RMT.
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Ben Swinburne, Morgan Stanley - Analyst [32]
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My question was going to be whether there would have to be some period of time that has to elapse before you could do it.
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Greg Maffei, Liberty Media Corporation - President and CEO [33]
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I don't know the nuance of that, I don't believe that we would have to -- still have to come up with an ATB to go with it, unless we waited five years for it to become its own ATB, but you're really contemplating long-term stuff there.
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Ben Swinburne, Morgan Stanley - Analyst [34]
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Right. Okay. And then just looking at the press release here, the Series C are the non-votes?
Is that right? Okay. Do you know off the top of your head what the voting stake would be for Sirius shareholders in the new Liberty then, pro forma for all this share issuance?
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Greg Maffei, Liberty Media Corporation - President and CEO [35]
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They currently -- we control the votes of Sirius XM, because we have 52% of the votes. And they would move from being in a controlled subsidiary to having admittedly non-voting shares in the parent. So our view is most of their voting rights have already been obviated by the fact that we hold the majority.
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Ben Swinburne, Morgan Stanley - Analyst [36]
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Right. Okay. Got it. Okay. Thanks a lot.
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Greg Maffei, Liberty Media Corporation - President and CEO [37]
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That's why we don't view this as a significant change in terms of their voting relationship.
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Ben Swinburne, Morgan Stanley - Analyst [38]
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Right. Okay.
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Operator [39]
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Bryan Kraft, Evercore Partners.
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Bryan Kraft, Evercore Partners - Analyst [40]
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Greg, I guess the alternative to this would have been just selling it to Sirius' share repurchase program, as a source of capital for other investments, and down the road, ultimately doing an RMT spin merge with Sirius which would have simplified the capital structure, too. I guess, what made this a more attractive option than that first option that I had laid out?
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Greg Maffei, Liberty Media Corporation - President and CEO [41]
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Well, I think that we like Sirius XM. We are not really interested in selling down, and we're certainly not interested in giving up control.
And we thought frankly that there were a bunch of reasons why this was more attractive. First it gives more financial flexibility to go do other things with that capital, but it could be doing other things with the stock that enhance Sirius. I would point out today if Sirius wants to do a big acquisition, concerns about votes and everything become more meaningful -- that will go away with these C share structures, and so we think this creates flexibility for Sirius to do things as well, so we think it's very attractive in terms of creating flexibility, in ways that holding and trying to sell down aren't.
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Bryan Kraft, Evercore Partners - Analyst [42]
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Okay. And any -- it sounds like you're pretty positive on the long-term for Sirius' business against a backdrop where there's concerns, secular concerns --
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Greg Maffei, Liberty Media Corporation - President and CEO [43]
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We read your report, Brian. And moved.
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Bryan Kraft, Evercore Partners - Analyst [44]
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So that was what drove it?
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Greg Maffei, Liberty Media Corporation - President and CEO [45]
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No. I did read your report, though.
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Bryan Kraft, Evercore Partners - Analyst [46]
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Thanks for the -- promoting it on your conference call but I guess safe to assume you are pretty constructive and feel that there is a pretty good moat around their business, long-term, despite new competition coming into the car?
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Greg Maffei, Liberty Media Corporation - President and CEO [47]
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There is competition all the time. We obviously are very enthused with Sirius XM business. It's been a great performer, and we expect it to continue.
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Bryan Kraft, Evercore Partners - Analyst [48]
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Thanks very much.
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Operator [49]
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Kannan Venkateshwar, Barclays.
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Kannan Venkateshwar, Barclays Capital - Analyst [50]
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Just a couple of questions. The first is, until recently, you were talking about a buyback on a pretty large scale.
And suddenly the whole focus has changed now to more of a controlling structure. And buybacks now don't seem to be a priority. So purely in terms of --
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Greg Maffei, Liberty Media Corporation - President and CEO [51]
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I didn't read that in the press release, nor did I hear that in my earlier comments -- I think buybacks would be one of the things that will absolutely be on the table and attractive for this company going forward.
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Kannan Venkateshwar, Barclays Capital - Analyst [52]
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No. Purely from a Sirius buyback perspective, as a source of capital, that is something that you were talking about until recently. And now the structure that you're approaching -- the whole transaction width is slightly different from a capital perspective. So what changed over the last couple of months purely in terms of conversation with Sirius management and --
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Greg Maffei, Liberty Media Corporation - President and CEO [53]
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One more time, I kind of dispute your premise. You keep suggesting this says we won't be doing share repurchase.
What I noted as I said earlier in the call is I think share repurchase will be an important part of our capital structure, or our capital operations going forward. And I expect we will be doing share repurchase but we're going to weigh it against the full range of opportunities that are available to Sirius XM and Liberty.
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Kannan Venkateshwar, Barclays Capital - Analyst [54]
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Sorry. I was talking about actually the Sirius buyback program not the Liberty program.
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Greg Maffei, Liberty Media Corporation - President and CEO [55]
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Yes. But now, they're going to be one and the same, so I don't I'm not sure exactly how that changes. Right? Now you're going to have --
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Kannan Venkateshwar, Barclays Capital - Analyst [56]
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I guess --
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Greg Maffei, Liberty Media Corporation - President and CEO [57]
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The Sirius buyback program becomes the Liberty buyback program.
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Kannan Venkateshwar, Barclays Capital - Analyst [58]
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No, that's true. But purely in terms of who's the driving that buyback program, it's likely different?
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Greg Maffei, Liberty Media Corporation - President and CEO [59]
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Who do you think drives it today?
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Kannan Venkateshwar, Barclays Capital - Analyst [60]
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I mean --
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Greg Maffei, Liberty Media Corporation - President and CEO [61]
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We own 50% of the company, which believe me, if there was -- Liberty wasn't endorsing a buyback program at Sirius, it wouldn't be happening.
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Kannan Venkateshwar, Barclays Capital - Analyst [62]
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Okay. So I guess the logical assumption then to make is that the Sirius management team is broadly on board? With --
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Greg Maffei, Liberty Media Corporation - President and CEO [63]
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I think you'll have to -- I'd like to think so, I think you'll have to ask them, but of course, this will be ultimately determined by an independent Special Committee. We obviously care about the support of the Sirius management team, and I believe they are supportive. But the Special Committee will be the one to determine that this in the interest of the non-Liberty Sirius shareholders.
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Kannan Venkateshwar, Barclays Capital - Analyst [64]
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Okay. And then purely from a leverage perspective, the Sirius management team has been slightly more conservative on that front, so it's fair to assume that now with you resuming control, that you have a slightly different perspective on leverage?
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Greg Maffei, Liberty Media Corporation - President and CEO [65]
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I would say in general we have been like-minded with the Sirius management, but we probably are a little more -- Liberty has traditionally been more aggressive than many of our subsidiaries.
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Kannan Venkateshwar, Barclays Capital - Analyst [66]
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Right. Thank you.
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Operator [67]
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James Radcliffe, Buckingham Research.
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James Radcliffe, Buckingham Research - Analyst [68]
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Following up on the leverage topic, is there any reason that regarding the Sirius covenants that would affect debt borrowed at the Liberty level, post this transaction? And how do you think that rating agencies would tend to look at Liberty, now that it would be a combination of pretty sizable chunks of publicly-traded assets and a large operating business?
Do you think you'd get credit for the non-strategic publicly-traded securities as quasi-cash when you look at it, or don't think you'll get that benefit? Thanks.
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Greg Maffei, Liberty Media Corporation - President and CEO [69]
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On the latter point I think -- I can't speak to what the rating agencies will do, but I suspect this would be an incremental enhancement to our capital, our existing bonds, and our ability to borrow at the Liberty level. And maybe you could repeat and make sure I understood the first question?
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James Radcliffe, Buckingham Research - Analyst [70]
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Wondering if there were any restrictions from the Sirius covenants --
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Greg Maffei, Liberty Media Corporation - President and CEO [71]
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Right. Not to my knowledge. Not to my knowledge. I don't believe this will have any restrictions on borrowing at the Liberty level because of actions at Sirius.
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James Radcliffe, Buckingham Research - Analyst [72]
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Great. Thank you.
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Operator [73]
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John Tinker, Maxim.
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John Tinker, Maxim Group - Analyst [74]
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Just to clarify, so who will be -- you mentioned there may be some negotiation on the price. So who will you actually be negotiating with?
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Greg Maffei, Liberty Media Corporation - President and CEO [75]
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Well, the Board of Directors of Sirius XM, as we noted, will have to form a Special Committee. Our understanding on best practice on these is that Special Committee will be as independent as possible, and they will be the ones determining what is the best interest of the non-Liberty Sirius shareholders, and that's the group who will be responsible, I'm sure they will hire financial advisors in to advise them, and they'll have lawyers advise them, but it's some combination of them, but ultimately responsible, responsibility will lie with that Special Committee.
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John Tinker, Maxim Group - Analyst [76]
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And Liberty, to some extent, to be crude, was regarded as John Malone's PA. And now it's becoming is it fair to say it's now becoming far more of an operating company?
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Greg Maffei, Liberty Media Corporation - President and CEO [77]
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I'm not sure I agree with John Malone's PA.
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John Tinker, Maxim Group - Analyst [78]
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I said PA.
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Greg Maffei, Liberty Media Corporation - President and CEO [79]
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We've owned controlling positions and 100% positions in many companies along the way. Whether it be QVC or Starz or many others along the way, so I'm not sure I would do that.
When we've moved our portfolio around to try and take advantage of what we thought were attractive opportunities, whether it be to create independent companies, which we thought would be valued more appropriately, or whether we're buying things were consolidating things, because we thought we could do, and add value to them. So I don't believe, fundamentally, everything we've been doing over the last eight years, since I've been at Liberty, and I don't think we've changed one iota.
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John Tinker, Maxim Group - Analyst [80]
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Sorry. Just another final clarification, what's the difference between the LMCA shares and the LMCC shares?
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Greg Maffei, Liberty Media Corporation - President and CEO [81]
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The LMCA shares will have one vote per share, and the LMCC shares will have no votes per share.
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John Tinker, Maxim Group - Analyst [82]
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Thanks. Congratulations.
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Operator [83]
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Tuna Amobi, S&P Capital.
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Tuna Amobi, S&P Capital IQ - Analyst [84]
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Thank you so much. I guess one of the obvious questions is, how you will figure out the exchange ratio and the implicit premium. I guess, is that something that's set in stone, or is there some flexibility to revisit that, depending on the response you might get from the majority of the minority at Sirius?
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Greg Maffei, Liberty Media Corporation - President and CEO [85]
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Well, I think first the responsibility for negotiating that will be, or dealing with whether that's considering an attractive offer, will be the decision, as I noted of the Special Committee and their advisors. And it would not be unknown for a Special Committee to come back and ask for more. And we'll weigh what they ask for and whether they -- that's attractive for Liberty as we go forward.
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Tuna Amobi, S&P Capital IQ - Analyst [86]
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Okay.
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Greg Maffei, Liberty Media Corporation - President and CEO [87]
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Specifically, if I could add one thing, as you note, ultimately this will have to go to a vote of the minority shareholders, the non-Liberty shareholders, and they'll have to find it attractive too, but negotiating on their behalf will be a special committee.
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Tuna Amobi, S&P Capital IQ - Analyst [88]
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Right. Let me rephrase the question. Why did you think that such a relatively modest premium is appropriate as your first shot?
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Greg Maffei, Liberty Media Corporation - President and CEO [89]
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We think the new C shares that we are offering this in will be attractive, and be -- as the most liquid and largest issuance of Liberty shares, will be the premier asset or trading security, rather equity security of Liberty, and we think offering, given the large portion Sirius is today already of Liberty, and the fact we are offering them the most attractive liquid attractive security that Liberty will have, we thought was this was an attractive offer for them.
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Tuna Amobi, S&P Capital IQ - Analyst [90]
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Okay. That's helpful. Thank you.
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Operator [91]
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Sachin Shah, Albert Fried.
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Sachin Shah, Albert Fried & Company - Analyst [92]
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So I just wanted to understand -- I did see the letter here, that you posted in the 13-D filing. Why was the letter filed? This is an offer, and the Special Committee has done it. Why haven't you just announced a definitive merger agreement?
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Greg Maffei, Liberty Media Corporation - President and CEO [93]
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Special Committee has just been formed. And they have not yet approved the deal.
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Sachin Shah, Albert Fried & Company - Analyst [94]
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Okay. But I mean --
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Greg Maffei, Liberty Media Corporation - President and CEO [95]
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It's only been offered to the Company with the Special Committee will have to rule on, and look at.
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Sachin Shah, Albert Fried & Company - Analyst [96]
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Okay. But are they aware of this, aside from the letter? This could be could have been done behind the scenes, and you could have announced --
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Greg Maffei, Liberty Media Corporation - President and CEO [97]
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My understanding is when we, given our large position, when we changed our intent and made the decision to make an offer, we were obligated to make our 13-D filing, and make the offer public.
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Sachin Shah, Albert Fried & Company - Analyst [98]
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Okay. And so they are aware -- (technical issue).
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Greg Maffei, Liberty Media Corporation - President and CEO [99]
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Sorry, they are aware? I didn't hear the end of your --
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Sachin Shah, Albert Fried & Company - Analyst [100]
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They are aware of the premium that you're providing them?
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Greg Maffei, Liberty Media Corporation - President and CEO [101]
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They have the letter, and they have the data that we set forth in the letter, as you do.
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Sachin Shah, Albert Fried & Company - Analyst [102]
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Okay. All right. What regulatory approvals are needed here?
Aside from the shareholder vote, the minority of -- majority of the minority? What regulatory approvals are needed?
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Greg Maffei, Liberty Media Corporation - President and CEO [103]
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I think, given that Liberty is already in control from the SEC standpoint of a the Sirius assets, we do not believe there will be significant regulatory approvals, other than the votes we outlined.
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Sachin Shah, Albert Fried & Company - Analyst [104]
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Okay. Thank you.
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Operator [105]
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Brian Shea, Wells Fargo.
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Brian Shea, Wells Fargo Securities - Analyst [106]
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You mentioned earlier that there was significant borrowing capacity at Sirius. Could you talk a bit more about how you have used Sirius as a financing entity, whether that 3.5 total leverage target or range implied by their management team is still in play?
And also, there had previously been talk of an intermediate holding company for Sirius. Would an intermediate holding company still be on the table?
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Greg Maffei, Liberty Media Corporation - President and CEO [107]
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I'll take the last part first. Yes, I think an intermediate holding company could still be on the table. And if you think about Sirius as an asset within the Liberty portfolio, probably rather than a stand-alone entity, probably could sustain greater leverage for that fact alone. But we'll evaluate that, and look at the alternatives and weigh the cash flows and the capital structure as we go forward, but I don't suspect we'll be looking at less leverage than the target management has outlined.
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Brian Shea, Wells Fargo Securities - Analyst [108]
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Thank you.
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Operator [109]
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Ladies and gentlemen, we have time for one additional question. Zach Miller, Three Peaks Capital.
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Zach Miller, Three Peaks Capital - Analyst [110]
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Most of my questions have been answered, but I guess, maybe just tagging onto that last question, in terms of a max leverage level, is there any thought on that? And then also thoughts on the covenants that are in the existing Sirius XM OpCo bonds that might restrict borrowing capacity?
Any thoughts on what you would do with those covenants? Thanks.
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Greg Maffei, Liberty Media Corporation - President and CEO [111]
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Yes. I think we have addressed those -- I don't think we've come up with a max borrowing level. And I think at some point, there's a HoldCo structure that's been discussed, to help work around some of the restrictions that are in the existing Sirius XM bonds.
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Zach Miller, Three Peaks Capital - Analyst [112]
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Okay. Thanks.
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Greg Maffei, Liberty Media Corporation - President and CEO [113]
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Thank you all for joining this afternoon. And we look forward to speaking to you again over the coming weeks and months about this transaction, and other matters.
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Operator [114]
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Again, ladies and gentlemen, that does conclude our conference for today. We thank you all for your participation.
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