updated 08:25 pm EST, Tue February 10, 2009
Sirius XM Near Bankruptcy
People aware of the situation have told the New York Times that satellite radio provider Sirius XM is readying itself for the possibility it may declare Chapter 11 bankruptcy. Although still solvent, the company is believed talking with experts in bankruptcy cases and restructuring and has made enough progress in the necessary documents that it could make its declaration "within days." No official signals have been given regarding a potential collapse.
The move is prompted by the broadcaster's outstanding debt. Although EchoStar chief Charles Ergen recently bought up $300 million in debt from Sirius XM that was about to come due, about $625 million will be owed this year and would likely sink the company without a reorganization and a way to defer debt payments.
Speculation has surfaced that the debt relief given by EchoStar is the first step towards a buyout of Sirius XM and that the new risk of bankruptcy may force Ergen to move more quickly, either making a takeover bid quickly or else using the debt purchase as a bargaining tool to gain a large stake in Sirius XM and let EchoStar help dictate Sirius XM's future.
Sirius XM has routinely and unsuccessfully fought to turn a profit and is widely understood to have been hindered by the roughly 18-month delay in the US government's merger between Sirius and XM as well as by competition from alternative sources: the subscription-only service has had both immediate competition from free HD Radio stations as well as from portable media players like iPods. Many cars sold in the US now have built-in or optional iPod interfaces while satellite radio is still less common and often tied to just one of Sirius XM's two networks.
The service's most direct sign of difficulty has been a rare price hike in January that began charging for Internet radio as well as boosting the rates for some of its key satellite plans.