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EchoStar Buys Sirius XM Debt: WSJ

2/05/2009 10:27:00 AM Eastern

New York — EchoStar has acquired a significant amount of Sirius XM’s debt and may be attempting to gain control of the satellite-radio company, according to a report in the Wall Street Journal today.

Echostar CEO Charlie Ergen recently acquired a portion of Sirius’ $300 million debt that matures on Feb. 17, the report said, citing “people familiar with the matter.” 

It suggests Echostar could be pursuing a strategy to use the debt to take control of the company.

Sirius and Echostar have not yet responded to TWICE inquiries.

Sirius XM’s stock has dipped to 14 cents a share in recent months, down from more than $3 per share, as the company struggles to refinance a total of almost $1 billion in debt in three payments this year, the first of which comes due this month.


Sirius XM has already reduced its debt in the first payment from over $300 million to about $175 million, in swapping debt for equity, but it is not known if EchoStar was involved in this transaction.

Over the past two months, media reports have questioned the viability of Sirius XM, saddled with such high debt in a market where credit is virtually frozen.

This week David Bank, analysts for RBC Capital Markets said on MSN Money he believed financial restructuring is a possibility for Sirius.

“I think the company is going to survive. The question is what is the value to shareholders. It’s going to be very challenging to get the cash flow. A financial restructuring is a real possibility,” he said.

Banks pointed out that over 50 percent of cars rolling off the assembly line include Sirius XM, mainly as standard equipment and that about 50 percent of consumers buy the service after the initial free trial. This presents opportunity for some growth even in this economy, he said.

Paul Taylor of the National Automobile Dealers Assn., also on MSN Money, said he believes that General Motors will begin offering Sirius XM service for a two year trial period, up from the standard three to six month trial.

On the retail front, Audiovox took over this month as the Sirius distributor, replacing Directed Electronics. No policy changes have yet been announced.

Audiovox Electronics president Tom Malone said, “of course there will be some operational differences but overall we will try to make this a smooth transition for our customer base.”

He said there will be no product changes. Sirius representatives are allegedly meeting with Audiovox executives today.

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