More twists and turns arise in Sirius XM's struggle with EchoStar

Things are going very badly for Sirius XM, the company created when Sirius Radio and XM Radio merged to form a single satellite radio provider.  With its stock in shambles, the company is also seeing its growth slow and its credit vanish.  The company also owes millions in payments to EchoStar, which bought some of its debt.

EchoStar chief executive Charles Ergen would love to seize control Sirius XM and add it to his fold.  However, Sirius XM chief executive Mel Karmazin is vigorously resisting the takeover.  He has retained bankruptcy lawyers to draft up a Chapter 11 filing as a way to escape his company's debt to EchoStar.  However, a filing would likely leave his own company in shambles, and could still lead to a takeover if a court ruled in EchoStar's favor.

As an alternative to such drastic measures, Sirius XM is pursuing a deal with EchoStar's rival DirecTV to try secure financing and escape the clutches of its previous creditor.  Mr. Karmazin is reported by the New York Times to be in preliminary talks with John C. Malone's company, Liberty Media, which owns a controlling interest in DirecTV.

A partnership with DirecTV would pair the nation's largest satellite TV provider with its largest satellite radio provider.  While such a partnership would be advantageous to DirecTV in a number of ways, a move to partner with Sirius XM could incite a bidding war with EchoStar.  Analysts say that EchoStar might come up on top in such a bidding war as it already controls much of Sirius XM's debt.  However, Mr. Ergen has lost a number of bidding wars over the years, including some to Mr. Malone.

Ultimately, Mr. Karmazin's moves might prove to be more of an effort to save his own job than to save the company.  A deal with Liberty would likely keep him as Chief Executive, while EchoStar would likely seek to replace him, given the pair's standoffish relationship.

Some analysts also believe that Sirius XM may simply be dangling the talks with DirecTV in front of EchoStar to secure a better deal, perhaps converting some of the debt to equity.

"So, I think the same thing of the music industry. They can't say that they're losing money, you know what I'm saying. They just probably don't have the same surplus that they had." -- Wu-Tang Clan founder RZA
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