Financially strapped Sirius XM Radio Inc. said Friday that it could file for bankruptcy as early as Tuesday if it cannot successfully negotiate with the holders of its debt.
While the satellite radio company said it has exchanged $172.5 million of debt maturing in December for new debt due in 2011, it still has about $175 million coming due this Sunday.
Sirius is fighting against attempts for control by Charlie Ergen, the chief executive of Dish Network Corp. and sister company EchoStar Corp. Ergen bought much of a $300 million batch of discounted Sirius bonds that come due next week. Sirius had rejected a previous offer by Ergen for control of the company.
A bankruptcy filing for Sirius would give it the right to terminate contracts with on-air talent, such as Martha Stewart and Howard Stern, who has a five-year, $500 million deal. A Chapter 11 filing also could crimp Sirius' growth because subscribers might shy away from a company in bankruptcy. Sirius has nearly 20 million listeners and provides a wide range of music, sports and talk radio.
Liberty Media Corp. is in talks with Sirius about possibly investing in the company, a move that could fend off Ergen.
But the DirecTV Group Inc., a Dish rival controlled by Liberty Chairman John Malone, is not involved in the negotiations, according to a person close to the situation. The person spoke on condition of anonymity because he is not authorized to talk about the negotiations. Liberty's participation in the talks was reported earlier by The Wall Street Journal.
Analysts said they didn't think DirecTV would want a satellite radio business or its satellites. DirecTV, the nation's largest satellite TV company, has launched new satellites and is focusing on enhancing its TV service.
Sirius and Liberty declined to comment.
The struggle over Sirius brings together three strong personalities: Malone, Ergen and Sirius CEO Mel Karmazin.
It also renews the adversarial relationship between Karmazin and Ergen. In 2004, when Karmazin was head of Viacom Inc. and in a dispute with Ergen over the fees Dish had to pay to carry Viacom channels, Dish published Karmazin's home number and told subscribers to call him.
This time, Karmazin is in a much weaker position, with Sirius' debt coming due that the company is not in good shape to repay. In total, Sirius has about $3.3 billion in debt maturing between now and 2014.
Given time, Sirius' purchase of rival XM last year could have led Sirius out of its troubles. The merged company became the only satellite radio provider in the country. By eliminating duplicated operations, it was able to cut costs deeply.
Karmazin's plans were foiled by a tight credit market that made refinancing difficult, and plunging sales of autos, its main distribution channel. Karmazin started to swap some debt maturing Sunday with equity, with limited success.
Ergen swept in and bought much of the debt, putting Karmazin in a tough position. Liberty then came into the picture as a possible lifeline.
On Friday, Sirius made some strides with part of its debt due in December. It swapped a portion of the 10 percent convertible senior notes due this year for senior secured notes due 2011. In return, debt holders will get an annualized 10 percent interest in cash, plus 2 percent in kind in 2010 and 4 percent in 2011. They also received a fee of $9.45 million, of which $5.1 million was paid in cash and the rest in Sirius common shares at 7.4 cents each.
Shares of Sirius were up 3.1 cents, or 42 percent, to 10.5 cents in afternoon trading.