U.S.-based Sirius XM said close to bankruptcy filing
Last Updated: Wednesday, February 11, 2009 | 6:09 PM ET Comments74Recommend51CBC News
Satellite radio giant Sirius XM is close to filing for bankruptcy protection in the U.S.. according to a report in the New York Times.
Sirius XM was created when two competing companies Ч Sirius and XM Ч merged. Together, they have more than $5 billion US in assets and the bankruptcy could be one of the largest in U.S. history.
In Canada, they're still separate companies, but there are questions about what will happen to their Canadian listeners if the U.S. parent goes bust.
Sirius XM pumps out music and entertainment on more than 100 channels every day. CBC Radio One and Radio 3 are among the stations carried by Sirius Canada.
Tight credit markets hurting Sirius XM
Rival satellite radio companies Sirius and XM merged last year because of financial difficulties.
But Sirius XM has never made money and it's carrying a debt of more than $3.25 billion US.
In good times, it could manage the debt and pay high-profile shock jocks such as Howard Stern, who makes $100 million annually.
But now there's a deep recession and tight credit markets are hurting the business.
Sirius XM could default on $150-million US payment at the end of this month.
Reports say the company has hired lawyers to help seek Chapter 11 bankruptcy protection in the US.
Kaan Yigit, president of Solutions Research Group in Toronto, says filing for Chapter 11 will give Sirius XM time to restructure.
"What that business is facing is the perfect storm of factors," Yigit, who has expertise in satellite radio, told CBC News.
But the question is whether XM Sirius can come up with a business model that will work, especially in a recession.
"The combined entity XM Sirius ... may cease to exist in six months to a year," he said.
Merger deal being explored
In Canada, Sirius, which is 40 per cent owned by the CBC, and XM remain two separate companies.
They will be able to continue to provide the same range of satellite radio stations they have provided since their launch in 2005, XM Canada president Michael Moscowitz said.
Under bankruptcy protection, XM Sirius in the U.S. should keep broadcasting as usual, he told CBC News. The Canadian satellite radio services have licensing deals to broadcast a selection of the U.S. stations, as well as Canadian channels.
XM Canada and Sirius Canada are exploring possible terms of a merger deal here, but have yet to reach an agreement.
A CBC spokesman said the public broadcaster is monitoring the situation of XM Sirius in the U.S.
With files from CBC's Mike Hornbrook