Sirius XM, the satellite radio company, may be close to filing for Chapter 11.

The New York Times newspaper has reported that the company is saddled with big debts and has hired advisers to prepare for a possible bankruptcy filing.

The NYT report noted that a bankruptcy would make Sirius XM one of the largest casualties of the credit squeeze.

Sirius XM is reportedly laden with US$3.25bn in debt.

Its business model has been dependent, in part, on the ability to roll over its enormous debts — used to finance sending satellites into space and attract talent like shock jock Howard Stern (who was paid US$100m a year, according to the NYT) — at low rates for the foreseeable future until it could turn a profit.

The company’s fortunes were also tied to the auto industry, which sells vehicles with its radio technology installed and represented the largest customer base among Sirius XM’s 20m subscribers.

The report added that Sirius XM owes about US$175m in debt payments at the end of February that it is unlikely to be able to pay.

Some analysts say that the restrictions imposed by US federal regulators on the merged entity that came out of the XM and Sirius companies also hampered its financial performance, along with fierce and growing competition from internet radio and portable media.