Sirius warns on possible bankruptcy, shares plunge
By Ben Berkowitz
LOS ANGELES, Aug 13 (Reuters) - Satellite radio Broadcaster Sirius Satellite Radio Inc. (NasdaqNM:SIRI - News) warned on Tuesday that it may have to seek bankruptcy protection if it cannot raise new funds, sending its shares spiraling down by more than a third to a record low.
In a filing with the Securities and Exchange Commission, Sirius said it needed as much as $600 million to continue operations. It said it had hired financial advisers for help on ways to obtain new funds, including a possible debt-for equity swap that would dilute current shareholder stakes.
Sirius also reported a wider second quarter net loss of $124.6 million, or $1.62 a share, compared with a net loss of $72.5 million, or $1.35 per share, last year.
Sirius shares closed down 35 percent, or 72 cents, at $1.35 on Nasdaq.
Ladenburg Thalmann analyst John Stone, who owns Sirius shares, downgraded the stock to "market perform" from "buy."
"We recommend that investors withhold committing additional funds to Sirius shares until the company makes tangible progress on the financing front" and firms up a distribution deal with Ford Motor Co. (NYSE:F - News), Stone said.
In the SEC filing, the broadcaster said it has hired UBS Warburg to advise it on a range of financial options.
The company also formed a special committee of independent members of its board of directors to look at its options. That committee has, in turn, hired an investment adviser to pursue "a substantial additional investment" in its stock from affiliates of Apollo Management and the Blackstone Group.
"If we fail to timely raise additional funds, we will be forced to seek protection under the United States bankruptcy code, materially reduce our operations, significantly alter our business plan and/or seek the sale of our company," Sirius said in the filing.
CASH ON HAND
The company said in the filing that it had $295.2 million in cash as of Monday and that it needed an additional $300 million to get it through all 2003, plus $300 million beyond that "until our operations become self-sustaining."
"This in no way indicates that a bankruptcy filing for Sirius is imminent," the company said in a statement sent to Reuters following a report of the SEC filing.
"Sirius currently has approximately $300 million in cash on hand, which is enough to operate the company into the second quarter of 2003, as previously announced," it said.
In the filing, Sirius also said it deferred for 90 days a term loan payment to Lehman Brothers Holdings Inc. (NYSE:LEH - News) of $7.5 million that had been due on June 30. It said it was allowed to do so under the terms of that loan arrangement.
Sirius has in the past said repeatedly that it needed to raise additional capital in 2003 to remain in operation and has said in past SEC filings that it would be unable to continue its service if it did not raise those funds.
The company on Tuesday said said it had 6,510 subscribers as of last Sunday and six weeks after its nationwide launch, up from 3,347 subscribers at the end of the second quarter.
Sirius' only competitor, XM Satellite Radio Holdings Inc. (NasdaqNM:XMSR - News), had its national launch last November and reported almost 137,000 subscribers through the end of June.
Second-quarter revenue was $70,000. The company launched its national service on July 1. It had no revenue in the year ago period.
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