Sirius XM May Face Possible Bankruptcy
February 11, 2009

Sirius XM, the company created out of combining the nation's only two satellite radio companies, Sirius and XM, has hired advisers to prepare for a possible bankruptcy filing, The New York Times reported.

A bankruptcy would make Sirius XM one of the largest casualties of the credit squeeze. With over $5 billion in assets, it would be the second-largest Chapter 11 filing so far this year, the newspaper noted, quoting Capital IQ.

Sirius and XM never earned a profit as independent companies. The combined entity has $3.25 billion in debt. A $175 million payment on that debut is coming due the end of February and the company is likely to be unable to pay.

Sirius XM has accrued its massive debt, in part, by sending costly satellites into space and hiring high-priced talent including Howard Stern, who makes $100 million a year, and Martha Stewart. A bankruptcy filing is possible means to restructure its staggering debt.

In addition, the fortunes of satellite radio are tied to the now-ailing auto industry, the largest customer base for Sirius XM's 20 million subscribers, the newspaper noted.

The New York Times said it is unclear how a bankruptcy would affect customers. Service is unlikely to be interrupted, but the company might have to terminate contracts of some of its expensive celebrity talent.

Sirius XM could eventually be taken over by another company, the paper said, possibly TV satellite company EchoStar. The two companies reportedly are in negotiations. Other media reports suggest satellite television mogul Charles Egren has offered to inject capital into the company and restructure its debt but not buy out other shareholders.

Sirius XM has seen its market value plunge by more than 96 percent since last July. Its stock has been trading on the NASDAQ for about 11 cents a share.

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