A battle is brewing for control of Sirius XM Radio Inc., and the consequences are uncertain for the nearly 20 million people who use the satellite radio service to listen to music, sports and personalities from Howard Stern to Martha Stewart.
With Sirius possibly heading into bankruptcy protection, the key player is satellite TV mogul Charlie Ergen.
The chief executive of satellite TV provider Dish Network Corp. and sister firm EchoStar Corp. is a former professional gambler who bought much of a $300 million batch of discounted Sirius bonds that come due next week. He offered to restructure the debt and inject several hundred million dollars into Sirius in exchange for control of the company, according to the Wall Street Journal.
His maneuvering comes as Sirius has few options left.
The satellite radio company has never made a profit, despite getting increasing numbers of subscribers, because it was burdened with massive interest payments on its debt. Analysts say that it could have grown out of its problems, especially after acquiring rival XM last year, but it was hit hard by the credit crunch and poor auto sales -- its main distribution channel.
Now time is running out for Sirius and its CEO, Mel Karmazin, the former head of media giant Viacom Inc. and a past adversary of Ergen.
Sanford Bernstein analyst Craig Moffett said that Ergen holds the "cards that determine whether or not Sirius goes into bankruptcy. He's the one to whom interest is due."
Even in bankruptcy, debt holder Ergen would be assured a seat at the table for possible control of the company. Sirius has to refinance or repay nearly $1 billion of debt this year alone, and it's not clear how much Ergen holds and for which company -- Dish or EchoStar, a provider of set-top boxes and satellite services that was spun off from Dish last year.
