New York, February 11: What a grim turnaround for the usually optimistic satellite radio company, Sirius XM Radio Inc! (NASDA: SIRI). Who would have thought that the company aspiring to be an entertainment juggernaut not so long ago, would stare in the face of bankruptcy?

A report published on the website of the New York Times revealed that Sirius is working with its advisers to prepare for a possible bankruptcy filing. Sirius representatives neither took telephone calls nor replied to email messages.

Sirius’ possible filing for bankruptcy has something to do with financial institutions getting jittery on lending. The company has found it difficult to refinance its $1 billion worth of debt which is due in 2009.

Sources familiar with the matter said that Sirius has roped in experts like Joseph A. Bondi of Alvarez & Marsal and bankruptcy lawyer Mark Thompson of Simpson, Thacher & Bartlett to assist the company put in order a Chapter 11 filing.

Last year, Mr. Karmazin, Sirius XM’s chief executive was pretty upbeat about the company’s future. When questioned whether the present state of economy will have an adverse impact on Sirius he said, “Forty-three cents a day — it’s not even vending machine coffee,” referring to the low subscriptions

At that point of time he was making arrangements to cut costs and expand business. It now appears that company will have no choice but to terminate agreements with high-priced stars like Mr. Stern or Martha Stewart.

Another casualty of Sirius’ bankruptcy could be satellite television company EchoStar Corp as the latter has a sizeable portion (about $400 million) of the former’s debt. EchoStar chief Charles Ergen’s bid to take control of Sirius has already been snubbed. EchoStar will have the option to move to court and take over the company should Sirius go ahead with the bankruptcy filing.

With an assets base of $5 billion, Sirius’ bankruptcy Chapter 11 filing would be the second-largest this year next only to Smurfit-Stone’s filing which had an asset base of $7 billion.