Feb. 12 (Bloomberg) -- DirecTV Group Inc., the largest U.S. satellite-television provider, is in talks with Sirius XM Radio Inc. about a possible transaction, according to people close to the situation.

An accord may help prevent Sirius XM from seeking bankruptcy protection or agreeing to a deal with satellite company EchoStar Corp. less than a year after Chief Executive Officer Mel Karmazin completed the merger of the only two U.S. pay-radio providers. Sirius XM has $3.25 billion in total debt and has until Feb. 17 to repay $175 million in bonds held by EchoStar.

Both EchoStar and DirecTV, controlled by John Malone’s Liberty Media Corp., could use Sirius XM’s satellite capacity to integrate radio and television services, said Fred Moran, an analyst at Stanford Group. EchoStar has been buying Sirius XM’s debt since making an unsuccessful takeover bid in December, according to one person with knowledge of the matter.

“All of these companies are satellite-delivered media,” said Moran, who is based in Boca Raton, Florida. “If you can cross-market, cross-promote and intertwine services between satellite video and satellite audio, you could strengthen your competitive position.”

Patrick Reilly, a spokesman for Sirius XM, declined to comment. Robert Mercer, a DirecTV spokesman, said the company doesn’t comment on speculation.

Debt Load

As part of an accord, El Segundo, California-based DirecTV could buy out existing shareholders and repay Sirius XM’s debts, said one of the people, who declined to be identified because the talks aren’t public.

Another person said a deal with DirectTV may be hampered because of a possible bankruptcy filing by Sirius. In that case, EchoStar, led by CEO Charles Ergen, may be the favored buyer because of its bondholding in Sirius, the person said.

UBS AG, Switzerland’s largest investment bank, is advising DirectTV on its talks with Sirius, said the people. Douglas Morris, UBS spokesman in New York, declined to comment.

Sirius XM, based in New York, has traded for less than $1 a share since Sept. 10 as investors became concerned that Karmazin, 65, wouldn’t be able to manage the debt or meet growth projections. The company has $350 million in bank loans due in May and $400 million in convertible bonds due in December.

Karmazin said in August that he accepted an “ugly” debt deal to complete the merger before terrestrial radio rivals could block it. In November, he cut his forecast for 2009 subscriber growth by almost 1 million as collapsing auto sales cut demand for car radios.

Bankruptcy Reports

Sirius XM gained 35 percent to 7.4 cents in Nasdaq Stock Market trading today, and has slumped 38 percent so far this year. EchoStar rose 6 cents to $15.21 and dropped 57 percent in the past year. DirecTV gained 54 cents, or 2.4 percent, to $23.48 and declined 1.5 percent in the past year.

Sirius XM has been working with lawyers to prepare a possible bankruptcy filing, the New York Times said Feb. 10, citing unidentified people close to the company.

Roger Altman, CEO of investment bank Evercore Partners Inc., confirmed on a conference call last week that his firm is working with Sirius XM. He wouldn’t say whether the work involves mergers and acquisitions or restructuring.

To contact the reporter on this story: Serena Saitto in New York at ssaitto@bloomberg.net.

Last Updated: February 12, 2009 17:20 EST