Monday, October 27, 2008

SIRIUS XM RADIO: CAN THIS COMPANY SURVIVE?


After a long, painful merger approval process, Sirius Satellite Radio finally joined forces with XM Satellite Radio this summer. The marriage was largely motivated by difficult finances, as both companies were swimming in baths of debt.

Fast-forward a few months, and a serious debt overhang threatens to submerge the freshly-merged Sirius XM Radio. The company is staring down at least $1 billion in short term refinancing obligations, a situation that comes against a bone-dry lending terrain. That situation, coupled with a serious financial downturn, has pushed shares of SIRI below 30-cents in recent trading.

It has also raised questions on whether Sirius can survive the financial storm. The billion-plus debt obligation remains a pressing concern, and solid solutions remain absent. "There's hardly a day that goes by when I don't ask myself [if Sirius will survive]," analyst Tuna Amobi of Standard & Poor's recently expressed.

Meanwhile, shrinking consumer pocketbooks could slow subscriptions and device purchases, especially given the prevalence of cheaper entertainment options. Sirius executives, including chief Mel Karmazin, have expressed confidence that debt obligations will be extended, though markets remained deeply troubled by the prospects of a bankruptcy or Nasdaq deslisting.

SOURCE