(By Salman - iStockAnalyst Writer)
Early on Friday, reports surfaced suggesting that Sirius XM Radio Inc. (NASDAQ: SIRI), the struggling satellite radio operator, has moved closer to a deal with satellite mogul Charlie Ergen, who controls EchoStar (NASDAQ: SATS) and Dish Network (NASDAQ: DISH).
The report says that Sirius CEO Karmazin has been nearing a deal with his old foe Ergen in order to avoid a looming bankruptcy. Earlier, Ergen had offered to inject about $500 million into Sirius and restructure the debt he holds in the company in return for control. Ergen already holds $174.6 million in Sirius' bonds due Feb. 17. Sirius had previously turned down Ergen's unsolicited offer for the company. The offer is contingent on the successful renegotiation of about $600 million in Sirius bank loans and about $200 million in other debt.
However, it has been also reported that Sirius is still engaged in talks with John Malone's Liberty Media (NASDAQ: LINTA) about investing in the company and avert a collapse. However, few analysts had insisted that a deal between Sirius XM and Liberty Media is highly unlikely. In a research note to clients, Collins Stewart analyst Tom Eagan said an investment in Sirius by Liberty was "highly doubtful," adding that Sirius is using Liberty as a plank to put pressure on Ergen and extract more concessions. It looks like Karmazin's move has paid off as Ergen has softened his stance and has agreed to let him keep his job.
Earlier this week, New York Times had reported that Sirius XM has hired law firm Simpson, Thacher & Bartlett LLP as bankruptcy counsel and restructuring firm Alvarez & Marsal to prepare for a possible Chapter 11 bankruptcy filing.
The company carries a total debt load of about $3.25 billion and has nearly run out of cash. The company has not been able to arrange for repayment of its debt due to difficult situation in credit markets. For past few days, the company has been desperately looking for a white knight to save itself.
Sirius XM was formed by the merger of satellite radio companies Sirius and XM in July last year. The company has been hit hard as a slump in auto industry has reduced demand for car radios.
Shares of the company were up 16% in regular trade on Thursday.
Disclosure: Author does not own any of the stocks discussed here.
