Months after the merger that created the satellite radio company Sirius XM, mounting debt has forced the company to hire advisers to prepare for a possible bankruptcy filing, the New York Times reported. While the bankruptcy isn™t likely to affect service for Sirius XM™s 20 million subscribers, high-priced talents like Howard Stern and Martha Stewart™s contracts may be terminated. Capital IQ said with over $5 billion in assets, Sirius XM would be the second-largest Chapter 11 filing so far this year behind packaging maker Smurfit-Stone, with assets of $7 billion. Sirius XM is currently facing down $3.25 billion in debt after a business model that has operated on rolling over its enormous debts to finance sending satellites into space and paying talents like Stern™s $100 million a year salary. The dragging automobile industry, which sells vehicles with its radio technology installed and represented the largest customer base among Sirius XM™s 20 million subscribers, has also affected the company™s income. Sirius XM owes about $175 million in debt payments at the end of February that it is unlikely to be able to pay”possibly paving the way for a takeover by EchoStar, the TV satellite company, which has bought up Sirius XM™s debt.
Sirius XM™s chief executive Mel Karmazin has been in talks with EchoStar™s chief executive, Charles W. Ergen, over Sirius XM™s options, according to people involved in the talks. Those close to the meetings say Karmazin and Ergen have not been getting along, and Karmazin has refused Ergen™s takeover advances in the past. People involved in the meetings said Sirius XM hired Joseph A. Bondi of Alvarez & Marsal and Mark J. Thompson, a bankruptcy lawyer with Simpson, Thacher & Bartlett, to help prepare a Chapter 11 filing. A person familiar with the matter told the New York Times that documents and analysis are close to completion and a filing could come in days. The bankruptcy move could also be part of a negotiation move with Ergen, who could decide to convert his debt into equity instead of demand ing payment. However, EchoStar also owns $400 million of Sirius XM™s debt due in December. EchoStar could attempt to take over the company in court, should Sirius XM file for bankruptcy. Satellite Radio Company Sirius XM Faces Possible Bankruptcy – Technology – redOrbit.
format
