American satellite radio company Sirius XM may become yet another victim of the world credit crisis if it fails to secure refinancing of loans to pay the large debts it carries from launching and maintaining its satellites. The company, formed from the merger of competitors XM and Sirius, carries US$3.25 billion (A$4.9 billion) in debt and pays high profile talent such as Howard Stern and Martha Stewart salaries in the tens of million of dollars.

Repayments of US$175 million are due this month and reports from the US say the company is unlikely to be able to repay the interest. A report in the New York Times says the company has hired advisers to prepare a possible bankruptcy filing. The recent merger of XM and Sirius was meant to produce cost savings of US$400 million, but it appears that in itself may not be enough to turn around the company’s problems, even though, as recently as December, the CEO was trumpeting double digital growth in subscriber numbers.

The New York Times speculates that bankruptcy may be a negotiating tactic with the company’s major shareholder:

“Sirius XM’s problems could pave the way for a takeover by EchoStar, the TV satellite company, which has bought up Sirius XM’s debt. [CEO] Karmazin has been locked in talks with EchoStar’s chief executive, Charles W. Ergen, over Sirius XM’s options, people involved in the talks said. The men are said not to get along, these people said, and Mr. Karmazin had rebuffed Mr. Ergens takeover advances before.

Documents and analysis are close to completion and a filing could come in days, according to a person familiar with the matter. The threat of bankruptcy could also be part of a negotiating dance with Mr. Ergen, who could decide to convert his debt into equity instead of demanding payment.

In addition to the $175 million due in February, EchoStar also owns $400 million of Sirius XM’s debt due in December. If Sirius XM files for bankruptcy, EchoStar could seek in court to take over the company. Mr. Ergen, however, may be able to negotiate to convert his shares before bankruptcy at an attractive rate and gain control of the company…”

Also in the USA, Clear Channel Communications has drawn down another US$1.6 billion (A$2.4 billion) in credit to cover debt repayments.