The New York Times is reporting that Sirius XM Satellite Radio is working with restructuring expert Joseph A. Bondi of Alvarez & Marsal to prepare for a possible bankruptcy filing in an effort to force the satellite company EchoStar, which owns a substantial amount of the company’s debt, to make a formal offer for the company.
Charles Ergen, who controls a satellite-television empire including the Dish Network Corporation and EchoStar, recently acquired the majority of a $300 million tranche of Sirius debt that matures next Tuesday.
Since the news about the debt purchase has emerged, questions have surfaced over whether Mr. Ergen will make a bid to purchase Sirius. The threat of a possible bankruptcy filing could force Mr. Ergen to make a formal offer for the company now if he doesn’t want to go through an auction in bankruptcy court.
It could also compel Mr. Ergen to agree to convert his debt into an ownership stake in Sirius at a higher price than he originally considered.
With more than $5 billion in assets, Sirius would be second-largest company to file for Chapter 11 bankruptcy protection so far this year, according to the research firm Capital IQ’s database. The Smurfit-Stone Container Corporation, which had more than $7 billion in assets when it filed in late January, was the biggest so far.
As a subscriber and avid fan of the Howard Stern Show, I can only hope that, if EchoStar does acquire Sirius XM, Mr. Ergen will not make substantial changes to the business model. As one of the largest subsription services in the world, I do believe that Sirius XM will turn around with time.