Funds orbit Sirius away from bankruptcy
A $200 million cash infusion from some old investors gives the satellite radio company enough cash to keep operating through mid-2004, its CFO says.
Without it, the company, facing a $700 million debt, "would have to file for bankruptcy," CFO John Scelfo said. "We want to dispel all those bankruptcy rumors and move on."
Digital competitors Sirius and XM Satellite Radio launched monthly subscription alternatives to AM and FM radio after spending billions on risky satellite systems to attract subscribers by providing national coverage, higher quality audio and advertising-free programming. But both companies' debt levels have left serious doubts about their ability to survive until they can sign up enough subscribers to offset their costs.
"We can throw out that bankruptcy word," Scelfo said. "This helps our partners understand we are here to stay."
Scelfo said Wednesday that Sirius reduced its $700 million debt to $61 million because major credit holders agreed to exchange the debt for shares of Sirius stock. Sirius shares dropped 25 percent Monday, closing at 53 cents each.
As a result of the stock swap, Scelfo said, OppenheimerFunds now owns 25 percent of Sirius. Brokerage firm Lehman Brothers owns about 13 percent, and Loral Space and Communications owns about 6 percent. CNA Insurance is also a part owner of Sirius, but Scelfo did not provide a percentage.
Sirius has about 30,000 subscribers now, all paying a monthly fee for specially made radio receivers for cars or homes. Competitor XM said it had 201,500 subscribers as of the third quarter, with 350,000 expected by Dec. 31.
Scelfo said Sirius still plans a midyear release of a carry anywhere "boombox" similar to what competitor XM Satellite began selling in December. He thinks it'll spur sales and that Sirius will finish the year with 300,000 subscribers.