Sirius XM Prepares for Possible Bankruptcy

Sirius XM has hired advisers to prepare for a possible bankruptcy filing. It is unclear how a bankruptcy would affect customers. Service is unlikely to be interrupted, but the company might have to terminate contracts with high-priced talent. A bankruptcy would make Sirius XM one of the largest casualties of the credit squeeze; the bankruptcy filing would be the second-largest of the year. Sirius XM, which never turned a profit when both companies were independent, is laden with $3.25 billion in debt. Its business model has been dependent, in part, on the ability to roll over its enormous debts — used to finance sending satellites into space and attract talent — at low rates for the foreseeable future until it could turn a profit. The company's success and failure are also tied to the faltering fortunes of the automobile industry, which sells vehicles with its radio technology installed and represented the largest customer base among Sirius XM's 20 million subscribers. Sirius XM owes about $175 million in debt payments at the end of February that it is unlikely to be able to pay. Satellite mogul Charles Ergen has offered to restructure Sirius XM Radio Inc. debt and inject several hundred million dollars of capital into the company in return for control.