NEW YORK, Feb 5 (Reuters) - Sirius XM Satellite Radio Inc’s (SIRI.O) bonds jumped on Thursday after The Wall Street Journal said EchoStar Corp (SATS.O) has acquired a substantial portion of the company’s notes in a possible effort to take control of Sirius.
EchoStar, the satellite-television company controlled by Charles Ergen, recently acquired part of a $300 million tranche of Sirius debt that matures on Feb. 17, the people told the paper. For details, see [ID:nBNG301466].
Ergen also controls Dish Network Corp (DISH.O) ,the No. 2 U.S. satellite TV provider.
Sirius’ 9.625 percent bonds due 2013 jumped 9.25 cents to 34.5 cents on the dollar, according to MarketAxess.
The 2 percent bond maturing Feb. 15, 2009, also jumped 1 cent to 97.5 cents on the dollar although there was only one trade, MarketAxess data showed.
“EchoStar’s interest in the radio satellite company is certainly positive given its greater financial strength and resources,” Matthew Wilcox, analyst at KDP Investment Advisors, said in a report on Thursday.
“However, if EchoStar is setting itself up to take control of the company by purchasing enough debt to have a significant influence in any debt exchange or bankruptcy negotiations, we believe event risk has increased materially, as we expect EchoStar to play hardball and force Sirius XM into some form of restructuring,” he added.
Bondholders influence a company’s decision-making when it becomes distressed, and can force a company into bankruptcy or force a restructuring that gives them equity in the company.
“It is our view that any recapitalization would likely include a debt and equity exchange offer to current bondholders, which could provide material upside to bondholders from current levels over the intermediate term,” Wilcox said. (Reporting by Karen Brettell; Editing by Leslie Adler)