Sirius considers bankruptcy filing: reports
By David B. Wilkerson, MarketWatch
Last update: 10:52 p.m. EST Feb. 10, 2009Comments: 6CHICAGO (MarketWatch) -- Staggered by debt during the worst U.S. economic crisis since the Great Depression, Sirius XM Satellite Radio Inc. could be close to filing for bankruptcy protection, according to a report Tuesday.
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SIRI 0.11, +0.00, +3.6%) is working with bankruptcy lawyer Mark Thompson of Simpson, Thatcher & Bartlett, and Joseph Bondi, a restructuring expert, to set up a Chapter 11 filing that could come in the next few days, the New York Times reported on its Website Tuesday evening, citing an unnamed person familiar with the situation.
The Wall Street Journal mentioned the same names, citing two unnamed persons close to the matter, in its online edition.
A Sirius XM spokesman declined comment Tuesday night.
Documents and analysis are almost finished, the Times said.
The Journal reported this week that Charlie Ergen, head of satellite provider Dish Network (DISH:dish network corp cl a
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DISH 13.15, -0.76, -5.5%) , has acquired most of a tranche of $300 million in Sirius XM debt that matures Tuesday, and that Sirius turned down Ergen's unsolicited bid to buy the company.
A Sirius XM bankruptcy could pressure Ergen to make a formal offer to acquire the company, the Times said.
XM Satellite Radio and Sirius Satellite Radio were formed in the late 1990s. Though there was skepticism in some circles that people would pay for radio when it was available for free, as it had been for decades, the satellite services gained traction by convincing automakers to make them optionally available in cars and trucks. Sirius and XM radios were also available in retail stores.
Each company offered more than 100 channels of music or talk, across a wide array of genres and subgenres. The services were not interoperable, so that a buyer of XM equipment could not receive Sirius' service or vice versa.
Between them, they eventually attracted several million subscribers, including some listeners who had become disillusioned with conventional broadcast radio.
The rapid consolidation of traditional radio, made possible by the 1996 Telecom Act, helped create a perception that formats and playlists had become stale, with hundreds of stations owned by the same company sounding virtually the same.
However, Sirius and XM lost millions of dollars each quarter, weighed down by marketing costs and other expenses. They took on big sports contracts with such leagues as the NFL, Major League Baseball and the NBA. Sirius hired the outspoken Infinity Broadcasting morning personality Howard Stern in a highly publicized move that lifted the visibility of both companies, but saddled Sirius with a fat contract for the shock jock and significant costs associated with publicizing him. XM had to ratchet up its marketing efforts at the same time to combat the barrage of hype surrounding Stern.
In February 2007, the hemorrhaging companies announced that Sirius would acquire XM in a $13.6 billion deal. After a protracted regulatory review, the transaction was completed last July.
To complete the acquisition of XM, Sirius took on a massive amount of debt, and the combined entity has continued to struggle.
In the third quarter of 2008, Sirius XM lost $4.88 billion, or $1.93 a share. Subscribers rose 17% from the year-earlier quarter, but the company said declining auto sales had slowed its growth.
The stock has lost nearly all of its value. It closed at 11 cents on Tuesday.
David B. Wilkerson is a reporter for MarketWatch in Chicago
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