http://www.washingtonpost.com/wp-dyn...021601082.html
Sirius Creditors Argue Bankruptcy Is Not Good Option
By Cecilia Kang
Washington Post Staff Writer
Monday, February 16, 2009; 5:51 PM
A group of Sirius XM Radio creditors said yesterday that they will push to oust the company's chief executive, Mel Karmazin, if he cannot find an investor to save it from bankruptcy.
The satellite radio operator warned last week that it may have to file for bankruptcy as early as today if company officials cannot renegotiate $175 million in debt. Yesterday, a group of creditors said such a move would not be in the best interest of investors.
"From our perspective, there are restructuring alternatives that are preferable to bankruptcy," said Edward Weisfelner, a partner with the bankruptcy firm Brown Rusnick, which is representing creditors.
Weisfelner could not quantify how much Sirius debt his clients hold, saying several have probably sold some of their bonds in recent days to Charles W. Ergen, chief executive of the satellite television company Dish Network. Ergen has been quietly amassing Sirius debt and has been in negotiations with Karmazin about a potential takeover of the firm.
Weisfelner said that if the company does file for bankruptcy, his clients and other debt holders could move to appoint their own trustees to manage Sirius or remove executives, including Karmazin.
Karmazin, a veteran media figure who came to Sirius in 2004, was the architect behind the merger of the New York-based Sirius and XM of the District in July. That creditors might push to oust him was reported in the Wall Street Journal yesterday.
Combining the nation's only two satellite radio providers led to a drawn-out regulatory review by the Department of Justice and the Federal Communications Commission because the merger created a monopoly. Just as the merger was completed, the financial crisis froze credit markets, leaving Karmazin with few options to pay back debt on his heavily saddled firm.
The company's stock has plummeted from more than $3 last year to pennies, closing at 10 cents a share on Friday.
The problems for Sirius are multiple: It has never turned a profit. Subscriber growth has slowed. And the company is burdened with heavy costs to run its satellite technology and pay for banner names like the shock jock Howard Stern, who alone earns $100 million a year for his show. Aside from the $175 million due this week, Sirius also has $350 million in bonds due in May and has total debt of $3.2 billion.
Analysts say bankruptcy would be a double-edged sword. On one hand, shareholder value in the company would be virtually wiped out. But the move also would free Sirius from expensive contracts it holds with talents like Stern and Oprah Winfrey. Debt holders also could renegotiate partnerships with automobile manufacturers, which take a hefty portion of revenue from Sirius by agreeing to equip new cars with satellite radios, analysts say.
Sirius did not comment on the status of negotiations with potential investors but issued a statement saying: "The management of Sirius XM is continually working to ensure the best possible outcome for the enterprise."
