Faulty Signals: Sirius, Clear Channel Face Possible Bankruptcy

sirius radio Some of the nation's biggest radio broadcasters are flirting with bankruptcy, as Sirius-XM Satellite Radio and Clear Channel Communications both struggle to stabilize enormous debts acquired in mergers that were completed last year. Also this week, Muzak, the provider of the eponymous soft elevator music, declared bankruptcy.

Burdened with $3.25 billion in debt and with sources of credit dried up, Sirius XM probably will not be able to make a scheduled payment of $175 million that is due this month. It has hired financial advisers and bankruptcy lawyers for a Chapter 11 filing sometime this week, according to The New York Times Web site, which reported the news Wednesday.

The Times speculated that a bankruptcy filing could force a takeover of Sirius XM by Charles Ergen, the boss of Dish Network and EchoStar, who recently bought $300 million of Sirius debt maturing next week in an apparent bid to gain control of the company. A bankruptcy filing would force Ergen to take a stake in the company at a higher price than he had intended.



Separately, Clear Channel Communications is also in financial trouble, according to The Wall Street Journal, which reported Wednesday that the company's debt was trading down after it drew another $1.6 billion in credit on Monday. The WSJ said the downward trend in CCC debt trading meant that investors don't believe it will be able to pay back its loans.

The company was taken private last year by Thomas H. Lee and Bain Capital Partners, which borrowed $18.6 billion to buy out Clear Channel stockholders. The deal was almost derailed when the six-bank consortium that was supposed to lend them the money got cold feet, apparently fearing that the borrowers would not be able to repay the loans. The consortium tried to halt the deal with the last-minute insertion of "poison pill" clauses. Clear Channel and the private investors sued the banks for breach of contract and tortious interference, but the two sides settled with an agreement that lowered the price per share.

Finally, Muzak, provider of elevator music everywhere, filed for Chapter 11 bankruptcy protection on Tuesday. The court filing says that Muzak has a debt of between $100 million and $500 million, versus assets of just $50,000. Much of this money is owed to music publishers that have licensed songs to the company.

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