As expected, Sirius XM is preparing to file for Chapter 11 bankruptcy protection, according to a report late Wednesday (Feb. 10) in the New York Times.
According to the report, Sirius has been working with restructuring expert Joseph A. Bondi of Alvarez & Marsal and bankruptcy lawyer Mark Thompson of Simpson, Thatcher & Bartlett to help prepare a bankruptcy filing.
The documents could be filed in Delaware within days. Shares of SIRI closed up a fraction of a penny at 11.39 cents on Wednesday, and trading was normal.
Overwhelmed by fast-accruing debt, the satcaster needs to make a $400 million payment this month and is believed to be some $175 million short of its goal. The company is also looking at almost $1 billion in debt payments for 2009. In November during a presentation to analysts, CEO Mel Karmazin was confident that the necessary funding would be achieved and that refinancing would be possible, but the markets have changed dramatically since then.
EchoStar CEO Charlie Ergen has been scooping up Sirius debt for months, and, according to a Monday (Feb. 9) report in the Wall Street Journal, he made an offer in late December 2008 to fund the struggling audio satcaster and take control of the company. He made a subsequent similar offer, reported the Journal. The Times says Ergen could be forced to make a formal offer for Sirius and could end up paying a high price to convert his debt into ownership.
Meanwhile, Muzak Holdings LLC, another satellite audio company that relies on EchoStar's satellite system to deliver its 80-some channels of digital music to subscribers, filed for Chapter 11 protection in Delaware on Wednesday, citing that it has $438 million in debt and assets of only about $50,000.