EchoStar purchasing Sirius XM debt

Satellite radio company subject of takeover rumors

Wall Street was buzzing Thursday about a possible takeover play by Charles Ergen's EchoStar Corp. for Sirius XM Satellite Radio, which has struggled with a high debt load.

The Wall Street Journal reported that EchoStar has quietly bought a substantial portion of the satellite radio firm's debt in a possible step toward acquiring control of the company. It said Ergen may have bought debt that matures on Feb. 17 and senior bank debt due in May.

EchoStar could use the debt as leverage to take control of Sirius XM if that company goes for a bankruptcy restructuring or even outside of bankruptcy.

"It's highly unusual for a company to try to buy another company by buying their distressed securities," said Shelly Lombard, credit analyst at Gimme Credit, pointing out that this is usually a strategy employed by private equity firms, hedge funds or vulture investors. "But it's probably a good sign for Sirius XM."

Spokespeople for EchoStar and sister company Dish Network declined to comment. Sirius XM officials couldn't be reached.

Sirius XM CEO Mel Karmazin has said the credit crunch has put his firm in a tough spot given its debt burden, but he expects the company will be able to refinance its debt. Sirius XM was created by combining Sirius and XM Satellite Radio. The former competitors had spent heavily in recent years to secure exclusive programming and talent, such as talk show host Howard Stern and the rights to Major League Baseball games.

Sirius XM shares rose 15.8% to 17 cents on Thursday. EchoStar shares climbed 2.8% to $15.83, and Dish shares closed up 5.6% to $13.56.