Nov. 6 (Bloomberg) -- Sirius XM Radio Inc., the only U.S. pay-radio broadcaster, began talks with banks to refinance debt and lowered its forecast for subscriber growth after U.S. car sales plummeted.

The company is seeking to replace 2.5 percent convertible notes due next year, Sirius XM said in a statement today. It faces about $1 billion in loan repayments in 2009, including $250 million in convertible bonds in February.

Chief Executive Officer Mel Karmazin is trying to refinance as credit markets have dried up and the auto industry, Sirius XM's biggest single source of customers, has endured 12 straight months of declining sales. The stock has traded below $1 since Sept. 10 as investors lose confidence in Karmazin's ability to manage debt and meet growth projections.

``The threat of refinancing debt in hostile market conditions is the biggest issue weighing on the stock,'' James Goss, an analyst with Barrington Research in Chicago, said in an interview. Goss rates the shares ``outperform'' and doesn't own the shares.

Sirius XM, home to Howard Stern and the National Football League, was unchanged at 26 cents at 4 p.m. New York time in Nasdaq Stock Market trading. The shares have declined 91 percent this year.

Karmazin's $2.76 billion all-stock purchase of XM Satellite Radio Holdings Inc. in July created a company with more than 18.5 million subscribers. Sirius XM today predicted 19.1 million users by year-end, less than its earlier forecast for 19.5 million, and lowered next year's projection by almost a million.

More Stock

Last month, Sirius XM announced it was issuing more stock to pay down $50 million of its $300 million in February 2009 notes and asked shareholders to approve a reverse split. That was a change from August, when Karmazin said the company had no plans for a reverse split.

``Current economic conditions, particularly the dramatic and recent slowdown in auto sales, have negatively impacted subscriber growth for 2008 and 2009,'' Sirius XM said today. The company reiterated its forecast for adjusted earnings of $300 million in 2009 on revenue of $2.7 billion.

Sirius XM has agreements with automakers to preinstall its satellite radios in cars and trucks. U.S. auto sales plummeted 32 percent in October in what General Motors Corp. called the worst month for the industry since 1945 after accounting for population growth. Reduced access to loans kept people away from car dealerships as consumer spending slowed the most in 28 years. In August, Karmazin said Sirius XM could weather the decline because carmakers were putting his radios in more vehicles.

`Bad Situation'

``Mel Karmazin is making the best of a bad situation that seems to have gotten worse because of economic conditions which are beyond his control,'' Fred Moran, a Boca Raton, Florida-based analyst with Stanford Financial Group, said in an interview. Moran recommends holding the shares and doesn't own any.

Credit terms have loosened recently. The benchmark London interbank offered rate, what banks charge each other for three- month loans in dollars, dropped today to 2.39 percent, the lowest level in four years, after reaching a 12-month high of 5.15 on Dec. 5.

The Federal Communications Commission voted 3-2 on July 25 to approve the merger of the XM and Sirius. Concerned that traditional radio operators might get a judge to block the combination, Sirius struck an ``ugly'' debt deal to quickly complete the purchase of Washington-based XM, Karmazin said in August.

To contact the reporter on this story: James Callan in New York at jcallan2@bloomberg.net

Last Updated: November 6, 2008 16:10 EST