Sirius XM

(SIRI) - Get Report

shares were cut in half Wednesday after reports the satellite radio provider could be forced to file for bankruptcy or be acquired by another company.

Late Tuesday,

The New York Times

reported that

Sirius XM may file for Chapter 11 bankruptcy protection

"within days," and that it had been working with a restructuring expert and a bankruptcy lawyer to prepare for such a filing. The report cited people close to the company, who said documents and analysis are close to being completed.

The news came days after reports that

EchoStar

(SATS) - Get Report

, which sells set-top boxes and was the former parent of

Dish Network

(DISH) - Get Report

, and its CEO Charles Ergen had accumulated part of a $300 million tranche of

Sirius XM debt

set to mature on Feb. 17.

The Wall Street Journal

reported Wednesday that Ergen has offered to restructure Sirius XM's debt and inject several hundred million dollars of capital into the company in return for control, according to people familiar with the situation. Sirius XM was approached with the offer late in 2008 and declined, although the offer still remains on the table.

A Sirius XM representative declined to comment.

For Sirius XM, it seems as though the perfect storm has finally arrived. In less than a week, $175 million of the company's approximately $3.3 billion in debt will come due, with just under $1 billion set to mature before the end of the year. EchoStar also controls 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 operation of Sirius XM's business, has investors worrying about the company's viability. Sirius XM has yet to post a quarterly profit, and during its third-quarter earnings report, several key metrics for the company weakened, including net subscriber additions, the conversion rate of auto installations and monthly churn.

The

Journal

set an interesting stage for Sirius XM: raise the money to repay maturing bonds by Feb. 17, accept the capital injection and relinquish control to Ergen and EchoStar, or file for bankruptcy.

Either way, it appears that Sirius XM shareholders will be on the losing end. Since the July merger between Sirius and XM Satellite radio, the stock has declined more than 97%. On Wednesday, Sirius XM shares were down 50.4% to 6 cents. Ergen's plan reportedly doesn't involve buying out existing shareholders.

David Bank, analyst with RBC Capital Markets, said Sirius XM's management is currently in the very unenviable position of deciding a company's fate with few alternatives.

"They're trying to decide whether they want to essentially auction the company off in what would likely be a less-smooth transition for the business, or be driven into a less competitive negotiation and preserve a more orderly business environment," said Bank. "I'm sure they're also trying to raise money, but that's becoming increasingly tougher given the choice between settling with Ergen or going into bankruptcy."

Refinancing the company's debt is not a foregone conclusion, though, Bank says. "I would argue that every day that goes by, the credit markets have loosened," said Bank. "They could raise money tomorrow. Why is it harder today than it would've been a week ago?"

One reported problem has been the standoff between Ergen, a satellite mogul in his own right, and Karmazin, former president of

CBS

(CBS) - Get Report

. The

Journal

reported that both Karmazin and Ergen have often found themselves on opposite ends of the negotiating table.

"You're moving from being in control of your own destiny to having some other force dictate what that destiny is," said Bank. "I would imagine for Mel Karmazin, or any other accomplished executive, that has to be a really difficult state to have to react in."

Still, considering all available options, a takeover by EchoStar may not necessarily be a bad thing for Sirius XM. In addition to injecting capital into Sirius XM, EchoStar has other assets it can offer to Sirius XM.

"There is a lot of synergy and a lot of logic why Charlie Ergen would want to gain control of Sirius," said Bank. "There are a lot of things that make sense about it. Personally, I think the satellite radio business is a viable concern with a really poor capital structure. Ergen could bring synergy, customer care and marketing. I think he's interested in the business beyond just the spectrum."