Chapter 11? Who could have imagined that Sirius (SIRI) would go belly up after getting the merger green light with XM. (SIRI) needed to lower cost to subscribers and add more commercial advertisers. That didn’t happen so now it looks to be over. The whole satellite radio industry screwed up by paying the big celebrity names huge amounts of money. Things were spinning downward before Howard Stern was hired and it has been on a downward slope ever since. The problem with satellite radio and some of the big terrestrial radio companies is summed up in one word DEBT. “Mel Karmazin said he would not rule out bankruptcy, according to SaveSirius, but he noted that he does not think it would happen. Additionally, Karmazin said he believes the company will be able to refinance it’s debt”. Ya right, Mel, who were you trying to fool?
The Wall Street Journal details other key challenges that the company has to overcome to make it out of 2009 alive.
* $43 million the NFL is set to receive this month as part of its programming contract.
* $350 million in the form of a term loan and revolving credit facility are due in May.
* $400 million in senior convertible notes come up in December.
* Sirius can borrow only up to $250 million more without triggering covenants on later debt.
Hard to keep things going when all you do is lose money. They paid far too much for their contracts, and don’t have the revenue to keep things going.
Bear markets have a way of pulling back the curtains and flushing these businesses out of the system. Well, that is, unless you’re a bank, broker, insurance company, auto maker, auto parts maker, blah, blah…