Sirius XM Prepares Bankruptcy Filing?

[limegrass69]

http://www.nytimes.com/2009/02/11/technology/companies/11radio.html?_r=1

This, according to the NY Times. The story is also showing up on my Bloomberg.

Uh ohh!!!

 

[Brad Bishop]

This isn't the end of the world for them and, actually, not a bad move. It's Chapter 11 which allows reorganization and contract/debt renogotiation.

Of course, the debt is the kicker. They're fat on debt.

They, much like Six Flags, have amazed me with just how irresponsible they could be (old Six Flags management). Just one of those things where I think, "How could you, years ago, not see this coming?"

The bad part of Chapter 11 for them is that people have to purchase their radios to get their signal so if you were a consumer even thinking about it right now then this would probably make you think that you'd want to hold off until they look like they'll survive. Add that to the last 18 months of uncertainty with the merger, crappy stock price, and news reports of 'bankruptcy any day now' and it doesn't bode well for them.

The kicker is that if they didn't have all of these expensive contracts (sports, Stern, etc.) and just had managable debt they're actually a pretty decent service for your car and some homes (I'd guess, by far, most people listen to it in their car).

 

[limegrass69]

Hopefully they use this opportunity to reorganize themselves into a leaner operation with a manageable debt burden and realistic overhead. They bit off more than they could chew. They also assumed that they could refinance this stuff with either stock or new debt. The stock is virtually worthless, and the debt markets are a mess. It's their only option.

They need to be quick to reassure everyone that there will be no lapse or significant service changes or else the subscribers will head for the hills.

 

[Jleimer]

I am not sure what will occur from this , but it will be interesting to see what happens . My prediction is if they cant get anyone else to buy the company then they will file Chapter 7.

 

[Supafly]

I wonder if this is a way to screw Echostar. Charlie Ergen can't be happy holding all that debt.

 

[Jleimer]

That is a good possiblity , but right now that is only a rumor. I think the NAB are jumping for joy right now at their desks just waiting for them to welcome Mel back.

 

[Tgajr]

Good move

This is a good move in my opinion. They can get rid of all this debt and get rid of horrible contracts.

Oprah and Martha Stewart come to mind

 

[Supafly]

I can hear the lifetime subscription campaign coming to a screeching halt.
Equipment sales stopping. Wouldn't be surprised if their automobile OEM contracts are finished too.

Almost certain death blow for a subscription service. Forget expanding the subscriber base. If this dosen't lead to Chapter 7 it would be a miracle.

Would have been better if there was an orderly takeover by Echostar. At least there would be some confidence. I guess it can still happen.

Who wants to restructure anything with the same goons that destroyed Sirius still in place.

 

[flap_jackson]

So what does this mean for us as subscribers? Because this looks like a Lemming alert.

 

[Jleimer]

I dont know , but this means good business for Slacker , I see them getting a boat load of customers because of this. Personally for me I am going to wait and see what happens.

 

[sportboy]

If its true and they are going to file, that 100 off promotion for a lifetime is borderline criminal.

I can hear the lifetime subscription campaign coming to a screeching halt.
Equipment sales stopping. Wouldn't be surprised if their automobile OEM contacts are finished too.

Almost certain death blow for a subscription service. Forget expanding the subscriber base. If this dosen't lead to Chapter 7 it would be a miracle.

Would have been better if there was an orderly takeover by Echostar. At least there would be some confidence. I guess it can still happen.

Who wants to restructure anything with the same goons that destroyed Sirius still in place.

 

[HCLogo]

I really hope they don't die, I just fell in love with sat radio

I wonder how this will affect Canadian subscribers.

 

[MNXMFan]

If this is true, and they do file for bankruptcy, emerging from it would be nothing short of a miracle. Here's how this would most likely play out:

1. Stockholders get really pissed, as it will wipe them out, cancel any subs they might have
2. Potential buyers get wind of this, and stop buying satelite radio equipment
3. Subscribers get confused, think Sirius is ending like CC did, cancel their radios en mass
4. ALL existing contracts become null. Many content providers choose not to renew and take the risk. Programming starts disappearing (NFL will go first, by the end of this month I believe, because they have a payment due to them this month)
5. Everytime programming disappears, it takes a chunk of the existing base with it
6. Car makers, already hard up for cash, start asking for even more money to put recievers in cars, Sirius can't pay, and new subscribers are virtually nill
7. Potential suitors come in, and offer Sirius pennies on the dollar. Every day it drags on, they offer less and less
8. Gets stuck in the DOJ and FCC waiting for approval
9. Sats go dark quietly as they wait approval.

 

[eddiepritchett]

what will happen to the customers

 

[TheScionicMan]

IMO, the majority of subscribers don't follow the business end of Sirius and won't preemptively cancel based on these rumors, even if it turns out to not be a rumor. 20 Million paying subscribers is not something they are going to turn their backs on. The sub base has still been increasing, despite the horror stories heard around here. There's a big revenue stream going to Sirius, they just need to get a handle on what's going out, which hopefully the bankruptcy will do that, if it is in fact true.

 

[Brad Bishop]

This is a good move in my opinion. They can get rid of all this debt and get rid of horrible contracts.

Oprah and Martha Stewart come to mind

I don't think this gets rid of any debt. It allows them to restructure it and pay it off later and under different terms.

It does allow them to renegotiate their contracts with the 'stars' though.

 

[MNXMFan]

IMO, the majority of subscribers don't follow the business end of Sirius and won't preemptively cancel based on these rumors, even if it turns out to not be a rumor. 20 Million paying subscribers is not something they are going to turn their backs on. The sub base has still been increasing, despite the horror stories heard around here. There's a big revenue stream going to Sirius, they just need to get a handle on what's going out, which hopefully the bankruptcy will do that, if it is in fact true.

You might be right that they don't follow the stock. But this won't be a small bankruptcy. It will be headline news. Remember how this company said it needed a merger or bankruptcy would happen? And don't think that the NAB won't be chomping at the bit to advertise the failure of sat radio.

And the average sales rep at BB or any other retail chain will follow the stock just enough to make a stupid statement like "why buy it, they are going out of business" as they point them to the GPS display instead.

Subscribers might be slowly growing now, but a Ch. 11 BK filing WILL cause subscriber numbers to slam into reverse. That is why Mel has waited this long to do it. If it was an uphill battle to pay off that debt and keep subscribers happy before, that hill just got a ton steeper.

Stock is down 45% after hours. This BK is happening. Unless we here something from E* by Friday, Ch 11 is in our near future.

 

[Brad Bishop]

IMO, the majority of subscribers don't follow the business end of Sirius and won't preemptively cancel based on these rumors, even if it turns out to not be a rumor. 20 Million paying subscribers is not something they are going to turn their backs on. The sub base has still been increasing, despite the horror stories heard around here. There's a big revenue stream going to Sirius, they just need to get a handle on what's going out, which hopefully the bankruptcy will do that, if it is in fact true.

I think this is dead on. If you are already paying for SiriusXM why would you stop just because they went into bankruptcy. You'd want to keep paying as long as they kept giving you a signal (unless you really thought it sucked). If you're doing it quarterly then the most you could lose would be about $30.

I think this will hurt them getting new subscribers, though.

For Echostar, if they do get the company, I think it works well. Basically they get all of the hardware plus subscriber base and they don't have to go through any of the work to get the licenses from the FCC for starting a new company (as opposed to them putting up their own satellites for sat-radio and starting from scratch). They may even get the company at bargain basement prices.

 

[semipenguin]

what will happen to the customers

Not sure, but I would guess that we won't see much of a change for a while. They will cut some things, but I'm sure we'll still get our programming in some form. I wouldn't go crazy. Until something official comes out, don't worry. Just check back every so often...

 

[hexagram]

They're even mentioning it on the Wii console's News section

"Report: Sirius XM prepares for possible bankruptcy"

This is depressing... It will be interesting to hear Howard discuss it tomorrow. Maybe he'll bring Mel on the air to say something (because this does affect him if they do file for Chapter 11).