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Sirius XM Merger Options Growing?

"Whoever owns and controls the majority of the debt of a company that is headed toward bankruptcy will become the controlling enterprise post-bankruptcy," said Moran. "It's quite possible that Charlie Ergen's group is looking to take over Sirius for pennies on the dollar."

Moran adds that EchoStar and Ergen "look more like an opportunist ready to pounce on a struggling company to gain control of their operations should it default." Ergen's group is "buying the debt of Sirius as a way to backdoor itself into controlling the assets."

With less than a week to go until a chunk of the company's approximately $3.3 billion in debt will come due, and with just under $1 billion set to mature before the end of the year, Sirius XM is in a tough spot. Making matters worse for the company, EchoStar is said to also control a $400 million tranche of Sirius debt that expires in December, according to the Journal.

Additionally, a sharp tail-off in U.S. automobile sales, which is the bread and butter of Sirius XM's business, has investors worrying about the company's viability. Sirius XM has still yet to post a quarterly profit, and during its third-quarter report, several key metrics for the company weakened, including net subscriber additions, the conversion rate of auto installations and monthly churn.

"Sirius XM faces substantial hurdles, both in regard to their operations and their balance sheet," said Moran. "The debt obligations that are due this year may not be refinanced, given the current credit market and the company's lack of cash flow. The possibility of bankruptcy has increased and Sirius faces few options at this point."

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