Sat radio facing buyout or bankruptcy

I'm a big fan of satellite radio. I've had both XM and Sirius accounts for many years, and listen at home, in cars, in my office and in hotel rooms.

I had hoped that the merger would cut my monthly costs and enable me to listen to all programs on all of my radios.

Unfortunately challenges by the feds, competitors and others delayed the merger. The delay and expensive talent costs bled the companies for years, and when the merger was finally approved, the new "Sirius XM" faced recession and terrible car sales -- and car sales are a major source of new customers.

Satellite mogul Charles Ergen has offered to restructure Sirius XM debt and inject several hundred million dollars of capital into the company in return for control. Ergen's plan doesn't involve buying out existing shareholders, something many investors in the company had been hoping for.

Sirius rejected Ergen's offer late last year, but it remains on the table. While the two sides are still in discussions, Ergen has given no indication that it is prepared to accept the deal.

Yet Sirius may have no other option. If it can't raise about $175 million by Feb. 17 to repay bonds held by EchoStar Corp., which is controlled by Ergen, Sirius will likely be forced into bankruptcy. In addition to the February bonds, EchoStar controls $400 million of Sirius debt that expires in December.

The standoff has turned into a test of wills between Ergen and Sirius XM boss Mel Karmazin. Both are television-industry veterans and have often found themselves on opposite ends of the negotiating table.

A bankruptcy filing would wipe out Sirius's shareholders. Sirius's management and board would likely expose themselves to litigation if they filed for bankruptcy in the face of an offer that would preserve at least some of investors' equity in the company.

Sirius's total debt load is about $3.25 billion. Sirius shares fell five cents, or 44%, in after-hours trading to six cents. The company's market value has plummeted by more than 96% since last July as its crisis has worsened. Sirius hired bankruptcy and restructuring advisers several weeks ago to prepare for a possible bankruptcy filing. The hiring of bankruptcy and restructuring advisers, while not surprising given the company's financial predicament, doesn't mean a filing is imminent. (info from The Wall Street Journal)