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Sirius (NSDQ: SIRI) Satellite Radio has given itself a little more breathing room, converting some of its debt that matures at the end of 2009 into debt that expires in 2011. Though it’s a step in the right direction, it probably won’t be enough to allow Sirius to change its fate, either entering into a deal with an outside suitor or declaring Chapter 11 bankruptcy.
It’s an interesting negotiating tactic against Echostar (NSDQ: SATS) CEO Charlie Ergen, who reportedly has been vying for control of Sirius in recent weeks. (He has been buying up the company’s distressed debt while simultaneously offering to invest cash in the business.) The latest move by Sirius CEO Mel Karmazin causes Ergen to fall further back in the line of creditors that will negotiate with Sirius in the event of bankruptcy because the debt was converted to more senior notes. Of course, we’ve heard that Ergen was also buying bank debt, which is the most senior form of debt on Sirius’ books, so it’s still unclear what impact converting a small amount of debt would have on negotiations. Remember, Ergen apparently owns all the convertible debt due in a couple weeks and there remains an additional $200 million of convertible debt due December 2009 that has yet to be dealt with.
Much more on the saga at our Sirius channel