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Sirius XM Shares Drop On dump debt; Possible Bankruptcy
By Amarendra Bhushan for CEOWORLD Magazine Updated:February 11, 2009
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Shares of Sirius XM Satellite Radio Inc. (SIRI) dropped 31% in morning trading Wednesday on reports that the company could be close to filing for bankruptcy protection. The shares were down 3 cents at 8 cents. The stock traded in the $4 range two years ago.
Sirius XM 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 Web site Tuesday evening, citing an unnamed person it described as familiar with the situation.
The Journal reported this week that Charlie Ergen, head of satellite provider Dish Network (DISH), had acquired most of a tranche of $174.59 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 automobile manufacturers to make them optionally available in cars and trucks. Sirius and XM radio units 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.
Meanwhile Ergen still holds a slice of Sirius’ convertible debt and the Wall Street Journal implies that he and Sirius’ bosses are in some sort of dialogue. As of Sept. 30, Sirius-XM had $360m in cash or near-cash, an SEC regulatory filing shows. The company has $175m in bonds due to be paid next week on Feb 17. Sirius-XM is also obliged to keep at least $75m in wholly available cash to fulfil debt covenants.
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