Sirius XM Prepares Bankruptcy Filing

[duckman18561]

I just ran accross this on the New York Times web site.


Sirius XM Prepares Bankruptcy Filing

By ZACHERY KOUWE
Published: February 10, 2009
Sirius XM Satellite Radio has been working with advisers to prepare for a possible bankruptcy filing in a move that could put pressure on the satellite company EchoStar, which owns a substantial amount of the company’s debt.
Skip to next paragraph Related

Times Topics: Sirius XM Radio Inc.




Sirius has been working with the restructuring expert Joseph A. Bondi of Alvarez & Marsal and the bankruptcy lawyer Mark Thompson of Simpson, Thatcher & Bartlett to help prepare a Chapter 11 filing, people close to the company said. The documents and analysis are close to being completed and a filing could come within days, according to a person familiar with the matter.
Sirius, whose radio stars include the popular shock jock Howard Stern, has also been working with the investment bank Evercore Partners.
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.

 

[stevenmlaf]

I just ran accross this on the New York Times web site.


Sirius XM Prepares Bankruptcy Filing

By ZACHERY KOUWE
Published: February 10, 2009
Sirius XM Satellite Radio has been working with advisers to prepare for a possible bankruptcy filing in a move that could put pressure on the satellite company EchoStar, which owns a substantial amount of the company’s debt.
Skip to next paragraph Related

Times Topics: Sirius XM Radio Inc.




Sirius has been working with the restructuring expert Joseph A. Bondi of Alvarez & Marsal and the bankruptcy lawyer Mark Thompson of Simpson, Thatcher & Bartlett to help prepare a Chapter 11 filing, people close to the company said. The documents and analysis are close to being completed and a filing could come within days, according to a person familiar with the matter.
Sirius, whose radio stars include the popular shock jock Howard Stern, has also been working with the investment bank Evercore Partners.
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.

How will a bankruptcy filing affect lifetime subscriptions? Can they void/dishonor the lifetime subscription as part of the bankruptcy (assuming they continue to operate and/or change ownership)?

 

[LER]

My assumption is all things are possible. a BK filing can void some or all contracts, etc. I'd keep an eye on it. IANAL, however......

 

[DJ Rob]

It looks like Sirius is forcing Charlie's hand...should be an interesting few days ahead...

 

[Scott Greczkowski]

Yes indeed, if Sirius files for Bankruptcy now, all that debt Charlie purchased could be worthless. It appears that Sirius XM is trying to fend off Charlie.

Not sure who to root for here.

 

[satjay]

How will a bankruptcy filing affect lifetime subscriptions? Can they void/dishonor the lifetime subscription as part of the bankruptcy (assuming they continue to operate and/or change ownership)?

Humm..I recently called to see if they had any one year promotions, as I have not recived any mail regarding promtions and I used to get them all the times. They did not have any one year promtions but sure were pushing the lifetime. I wonder if this had anything to do with it??

 

[bigthrust]

They should have at least tried an advertising model like network TV. They also WAY overpaid Howard Stern and others. Another saga of poor business management.

 

[rad]

They should have at least tried an advertising model like network TV. They also WAY overpaid Howard Stern and others. Another saga of poor business management.

The reason I went with Sirius was to get away from commercials and all the yacking that was on our stations. I do agree that they spent WAY too much money on Stern, it did bring some customers over but not enough to cover his contract.

 

[apollog]

That's what happens when you are greedy and raise prices when things are going bad. Charging for internet listening when it was FREE before, COME ON NOW!!!!! You get what you deserve Sirius.

 

[DJ Rob]

That's what happens when you are greedy and raise prices when things are going bad. Charging for internet listening when it was FREE before, COME ON NOW!!!!! You get what you deserve Sirius.

They weren't being greedy. They were trying to make enough to be able to pay the notes due this month so they could stay in business...

 

[sundude90]

I would rather like to haveDirectv to buy SiriusXM. NOT Dish.

 

[DJ Rob]

The reason I went with Sirius was to get away from commercials and all the yacking that was on our stations. I do agree that they spent WAY too much money on Stern, it did bring some customers over but not enough to cover his contract.

Where are you getting your figures on this?

If you do the math, he brings profit to Sirius.
The total budget for both of his channels is about $100,000,000 a year including Howie's salary. Even without taking in consideration the thousands of dollars Sirius makes on the commercials that run on 100 and 101, they just needed about 700,000 paid subs to cover the operating expenses.

The Oprah and Martha Stewart contracts were probably a bust though...

 

[apollog]

They weren't being greedy. They were trying to make enough to be able to pay the notes due this month so they could stay in business...

They were greedy, buying up the competition so they can run a monopoly. Now, if they go under, there is no one else to offer Sat. radio service.

 

[DJ Rob]

They were greedy, buying up the competition so they can run a monopoly. Now, if they go under, there is no one else to offer Sat. radio service.

They didn't do it to "run a monopoly".

Before the merger, XM was about to go under. And Sirius wasn't much better since to keep up they spent money on VERY inflated contracts (ie NFL, Baseball, etc.) because of having XM as a competitor. They merged the two companies to try to stay in business by consolidating operating costs.

In addition to a few bad decisions and a bad economy, the 2 years it took the government to approve the merger was what really hurt satellite radio since both companies were stuck in a holding pattern.

 

[flyingsquirrel]

Yes indeed, if Sirius files for Bankruptcy now, all that debt Charlie purchased could be worthless. It appears that Sirius XM is trying to fend off Charlie.

Not sure who to root for here.

Unlikely to be worthless long term. The debt would more likely be converted to stock in the new company that would emerge from Bankruptcy.

 

[meStevo]

The length of the merger approval process sealed their fate IMO. Left them restructuring during a crappy economy where people are cutting back in addition to recovering from the high cost of competing against each other before becoming 1 entity.

 

[Nabber]

Just got a 1 year XM sub with my new Genesis. While I like much of the content, their sound quality is garbage on a 7.1 system. I hope they go under and someone resurrects them with a new business model based on near-HD quality audio.

 

[drdroo]

I would rather like to haveDirectv to buy SiriusXM. NOT Dish.

I disagree. DirecTV themselves have been passed around like a prison inmate several times over.

Charlie knows how to handle finances overall, he's just not so great with customers. This could be interesting.

 

[drdroo]

Just got a 1 year XM sub with my new Genesis. While I like much of the content, their sound quality is garbage on a 7.1 system. I hope they go under and someone resurrects them with a new business model based on near-HD quality audio.

I doubt it. If they did that, then they'd have 10 channels and they'd lose a majority of their customers.

Satellite Radio is about variety. The audiophiles have claimed time and time again that it would be wonderful to have such a service as you describe. The reality is that I'm not the kind of person that pays 1000$ for cables, and I'm not the kind of person that would buy Satellite Radio for 10 channels.

The 1000$ cables crowd usually doesn't have any interest whatsoever in Rock Alternative. Just sayin...

 

[rad]

Where are you getting your figures on this?

If you do the math, he brings profit to Sirius."
The total budget for both of his channels is about $100,000,000 a year including Howie's salary. Even without taking in consideration the thousands of dollars Sirius makes on the commercials that run on 100 and 101, they just needed about 700,000 paid subs to cover the operating expenses.

The Oprah and Martha Stewart contracts were probably a bust though...

Probably the same place you get your numbers, how about from http://www.nypost.com/seven/0110200...ts_700m__sirius_ly_business_peter_lauria.htm:

"January 10, 2007 -- Happy anniversary Howard Stern - here's $83 million.

That's the cash value of the 22.1 million shares of common stock Sirius Satellite Radio awarded the shock jock for exceeding subscriber growth targets by more than 2 million during his first year on uncensored radio.

Combined with his original five-year, $400 million contract and the $220 million in stock Sirius granted him last January, the value of Stern's total compensation has just topped $700 million"

Yea, a lot of it was stock which is worth about a roll of toilet paper now but it had to help delute the value of the stock and the company.

Or Sirius Satellite Radio and Howard Stern Go Ear to Ear with XM - Knowledge@Wharton

"No matter how this saga unfolds, Stern won't come cheap. Jonathan Jacoby, an analyst at Banc of America Securities, estimates that the true cost of Stern's contract will be about $670 million, including non-cash compensation. Stern and his agent, Don Buchwald, were awarded 34 million shares valued at about $200 million last month for bringing in more subscribers than expected. Fader finds it hard to defend Stern's compensation. While it's possible to cook up metrics to justify the deal, what remains to be seen is whether Stern's fans stick with Sirius. "A lot of them bought Sirius just for Stern, but there could be lower retention rates. It's very hard to imagine that the acquisition of one person, even if it is someone as popular as Howard Stern, will be enough to keep Sirius afloat for long," he says."

Unless we actually know who signed up ONLY for Stern and what their monthly bill is who knows for sure, I just said what I thought. The numbers I've seen assume that folks are paying the regular monthy charge for service. It doesn't take into account people that sign up for annual or lifetime service (I have lifetime and basically have been getting it for free now for three years).