Creditors Threaten to Force Sirius XM CEO to Step Down if Bankruptcy Option is Chosen

The chief executive of debt-laden Sirius XM Radio, Inc. (NASDAQ: SIRI) may have to step down from his position on mounting pressure from the creditors, following the company's decision to file for bankruptcy, a report said.

A group of creditors have told The Wall Street Journal that it is ready to oust Chief Executive Mel Karmazin and other senior executives, if the company opts to file for bankruptcy.

The creditors are insisting the company to avoid that option of dissolving its wholly-owned subsidiary XM Satellite Radio Holdings and instead finalize a deal with an investor that would allow it to remain solvent.

"Creditors will act quickly and definitively if they perceive that management is acting in their own interest and not in the best interest of the estate," Edward Weisfelner, a partner with Brown Rudnick LLP, the law firm representing the creditor group, told the newspaper.

"The board of directors should carefully consider the ramifications," Weisfelner added.

This is basically a game of chess. They are letting Karmazin know that if bankruptcy option is chosen his job is on the line. We believe however the bankruptcy option will not be chosen and a deal will be worked out with Liberty Media to assist in the companies current debt issue. Karmazin has been playing the bankruptcy card as a bargaining chip to let his debtors know that he could wipe them out if they continue to play hardball. Ultimately we believe Mel Karmazin will work in the best interest of the shareholder.

Another thing to note is that the option to file for bankruptcy is to dissolve XM Satellite Radio Holdings, not Sirius Satellite Radio. It would mainly put XM's debt into bankruptcy proceedings, not necessarily Sirius's debt. The XM debt has been the bulk of the debt due this year and a major reason for Sirius XM Radio's current predicament.

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