Sirius XM has a big debt payment due next week and is running out of cash and time.
The Wall Street Journal first reported that Dish Network and EchoStar mogul Charlie Ergen acquired the majority of $300 million of the satcaster’s debt in a takeover attempt.
Ergen now controls $175 million of bonds that Sirius needs to re-pay next week. The company must keep at least $75 million in cash to comply with debt covenants, according to an SEC filing.
Reports are that Ergen is using his bonds as leverage to force Sirius into a deal. Sirius carries a total debt load of about $3.25 billion.
Sirius XM was trying to fend off Ergen by preparing a filing for Chapter 11 bankruptcy so it could reorganize, according to news accounts. The threat of a possible bankruptcy filing could force Ergen to make a formal offer now if he doesn’t want to go through an auction in bankruptcy court.
Sirius rejected an earlier offer by Ergen to inject $500 million into the company and restructure short-term debt he holds in return for control of the company.
Thursday, The Wall Street Journal reported that Sirius XM had turned to Ergen competitor John Malone, who owns Liberty Media Corp., which controls DirecTV — though it wasn’t clear how much money Liberty would be willing to invest in Sirius XM, nor under what terms.
Sirius assets, like its BackseatTV product, would be attractive to both subscription-based satellite TV companies.
BusinessWeek reported that Sirius XM CEO Mel Karmazin reportedly is trying to renegotiate pricy contracts with Major League Baseball, the NFL, Oprah Winfrey and others; whether that list includes Howard Stern is unclear.
The Sirius XM stock price dropped to below a dime this week; Sirius XM investor group founder Michael Hartleib told Fox that a takeover would be better for investors than a bankruptcy.
Sirius XM has not publicly commented on any of the reports.