Scrambling to Clear Debt, Sirius Talks to EchoStar

The Wall Street Journal - Sirius XM Radio Inc. Chief Executive Mel Karmazin is scrambling to raise about $175 million by Feb. 17 to fend off the company's bankruptcy and a possible takeover threat from EchoStar Corp.

Sirius has been in talks for several weeks with EchoStar, which holds around $400 million of the satellite-radio company's debt, people familiar with the matter said.

EchoStar Chairman and Chief Executive Charles Ergen, who is believed to be seeking control of Sirius, has been accumulating Sirius debt since late summer, the people said. EchoStar holds most of the $175 million in Sirius debt expiring in February and owns more than half of a $400 million tranche coming due in December. Both stakes were purchased from hedge funds. Sirius's total debt load is $3.25 billion. Sirius didn't respond to a request for comment.

A spokesman for EchoStar declined to comment on the strategy behind acquiring the debt. It remained unclear what Mr. Ergen would do with Sirius if he acquires it. Mr. Ergen also controls satellite-TV provider Dish Network Corp. There is a link between Mr. Ergen's empire and his target: Former Sirius CEO Joseph Clayton is on the EchoStar board.

Industry officials and consultants see the latest EchoStar moves as a way to differentiate Dish from cable-television rivals by getting into wireless and mobile-video services. Combining the satellite spectrum and unused wireless spectrum Mr. Ergen already controls with the radio spectrum EchoStar would acquire is a way to reach that goal. Sirius's shares rose two cents to 17 cents. Its debt has also rallied.

Seeking to take control of a company by acquiring its debt is an unorthodox strategy and could backfire. The debt EchoStar holds is junior to $600 million in bank loans Sirius has taken out. In the event of a bankruptcy filing by Sirius, the bonds held by EchoStar could be worthless. But Mr. Ergen could be counting on negotiating a settlement with the banks that would allow him to seize control.

A bankruptcy filing could offer advantages to Mr. Ergen because it would allow Sirius to extract itself from costly contracts, including a $500 million, five-year agreement with radio personality Howard Stern. On his show Thursday, Mr. Stern said he didn't understand the financial details of EchoStar's moves, but added, "I just need to know who I'm working for on any given day."http://online.wsj.com/article/SB123388180101154945.html?mod=testMod

EchoStar Amasses Sirius XM Debt

The Wall Street Journal - Charles Ergen's EchoStar Corp. has quietly accumulated a substantial portion of Sirius XM Satellite Radio Inc.'s maturing debt in what could be the first salvo in an attempt to take control of the embattled company, according to people familiar with the matter.

Mr. Ergen, who controls a satellite-television empire around Dish Network Corp. and EchoStar, has recently acquired part of a $300 million tranche of Sirius debt that matures on Feb. 17, according to the people. Sirius recently converted part of the debt to equity, reducing the total debt outstanding to about $175 million. It isn't clear whether Mr. Ergen participated in the exchange, however. Mr. Ergen could also be buying up senior bank debt, due in May, which trades thinly on the over-the-counter market.

Mr. Ergen's salvo comes as Sirius shares have sunk to just 14 cents each, and large portions of its $3.4 billion debt load trade at a deep discount. The company, which has a market value of $501 million, isn't profitable, and has lost nearly all its value since the Sirius-XM combination was finalized this summer.http://online.wsj.com/article/SB123380657213851075.html?mod=testMod