Published Feb 11, 2009Things are looking progressively bleak over at Sirius XM radio, with several reports surfacing this week that the satellite radio service is preparing to file for bankruptcy. Formed last year out of a merger between competing satellite radio companies Sirius and XM, the joint company has yet to turn a profit and is reportedly buried under a hefty $3.25 billion debt.
A bankruptcy declaration would make Sirius XM one of the largest casualties of the global credit crunch, the New York Times reports, and with more than $5 billion in assets, it would mark the second-largest Chapter 11 filing so far this year.
The company's long-running financial problems are being attributed, in part, to the declining automobile industry, which has caused less people to install Sirius XM into their cars, as well as failed attempts to lure younger subscribers and the credit crunch in general. However, it should be noted that neither Sirius nor XM turned a profit before the current economic downturn.
While it's unclear how bankruptcy would affect customers, the Times reports Sirius XM would likely be forced to terminate the contracts of its high-priced celebrity talents, such as shock jock Howard Stern and Martha Stewart.
The financial pinch at the company has reportedly opened the door for a takeover by satellite TV company Echostar, which has already bought up $400 million of Sirius XM's debt and may take over the company before it ever files for bankruptcy.