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 isnâ„¢t likely to affect service for Sirius XMâ„¢s 20 million subscribers, high-priced talents like Howard Stern and Martha Stewartâ„¢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 Sternâ„¢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 XMâ„¢s 20 million subscribers, has also affected the companyâ„¢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 XMâ„¢s debt.
Sirius XMâ„¢s chief executive Mel Karmazin has been in talks with EchoStarâ„¢s chief executive, Charles W. Ergen, over Sirius XMâ„¢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 Ergenâ„¢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 XMâ„¢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.
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