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Sirius XM may declare bankruptcy
Sirius XM Radio Inc has been working with its advisers to prepare for a possible bankruptcy filing, the New York Times reported on its website on Tuesday, citing people close to the company. The move could put pressure on satellite television company EchoStar Corp, which reportedly holds a substantial amount of Sirius XM debt. EchoStar is known to many as Dish Network. It holds Sirius/XM debt but does not own the company.
Before XM and Sirius became one company, satellite television provider Directv carried XM Radio while Dish Network carried Sirius Radio.
It is interesting to note that in 2002 the FCC disapproved a proposed merger of both satellite TV providers. However, in late 2008 the FCC approved the merger of Sirius and XM.
Kaufman Bros. analyst Todd Mitchell this morning noted in a research piece that the Sirius and XM satellite distribution platforms are largely duplicative. Mitchell says the Sirius platform is highly specialized for satellite radio, but that the XM platform is “basically relatively generic,” with “Boeing workhorse satellites in very strategic orbits.” Mitchell says the XM satellites could be re-purposed “for any number of things,” including incremental HD capacity for the DISH Network.
What will happen to XM for DirecTV viewers? Will we lose the service altogether? Doing that would require FCC approval, and the Commission might not be that eager to pull the plug on a service with 20 million customers.
For now Sirius/XM is one standalone company. The larger problem is that Sirius has too much debt and a tricky business model. The stock nearly hit $69 in early 2000 and closed at 11 cents today. The company has reported losses totaling $8.5 billion since 2003.
I spoke with one investor who also enjoyed XM-13 (Willies Place) and he told me that Sirius/XM had to cut $35 million. He admitted that he invested in the company twice. The first time he made money, but this time he admits he may take a loss. The move comes at a time when the economy is so bad that people are eliminating some services from family budgets.