Sirius XM Heading For Bankruptcy Filing

Posted on Wed 11th Feb, 2009 12:13:55 PM

Just as we mentioned Sirius XM Satellite Radio (SIRI) earlier this week in our post 15 Companies Nearing Bankruptcy it seems a bankruptcy filing is in the very near term future for the satellite radio provider. If Sirius can’t refinance its debt bankruptcy protection is nearly unavoidable.

SIRI stock is down nearly 50% as of noon EST, trading at $.06 a share, down from from $.11 yesterday.

MarketWatch Reports:

Sirius 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 Wall Street Journal reported this week that Charlie Ergen, head of satellite provider Dish Network (DISH), had 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.

Many Sirius XM listeners are addicted to this type of radio over conventional broadcasting with commercials and we don’t blame them. The company has been burning through millions of dollars though with steep marketing costs and paying for huge contracts with artists such as Howard 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 facilitate the acquisition of XM, Sirius took on a massive amount of debt, and the combined entity has continued to struggle.

And struggle they have. Take a look at the following stock chart of Sirius XM (SIRI) to view the journey towards pennies per share (full detailed analysis chart coming later).

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