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"Use Sirius Bonds to Play the Other Side"

By Jim Cramer
RealMoney Columnist
11/10/2009 10:59 AM EST

"If you like Sirius (SIRI - commentary - Trade Now), do not play the common stock. The bonds are the best bet. Not that long ago, in the summer, Barclays put out a terrific piece about the 3.25% Sirius converts due 2011. These converts, which currently sell at 88, could be a great play on any turn, because they will get paid off at a nice gain.



Barclays likes it because there is no other Sirius debt due ahead of it, and if it gets in trouble, Liberty Media (LINTA - commentary - Trade Now), the new investor that injected capital, will make that debt good, because bankruptcy wrecks the principal asset that SIRI brings to the table: its gigantic operating loss.

I am also drawn to the 9.625% notes that mature in 2013, a piece of paper that has zoomed in value since the decent quarter Sirius posted, and which trades more actively than all other bonds. These trade at 94 and yield 11.65%.

Why not the common? For many of the reasons detailed here by others: massive dilution, unlikely to produce an actual profit and more likely to do nothing as the bonds pay off no matter what happens to the operation. I also believe that if there is any upside to the common, it will be taken by Liberty, which, historically, is a very greedy partner. "

(in www.realmoney.com)