For market outsiders who don’t relish the chess game of corporate finance, headlines don’t always excite. But bankruptcy headlines get noticed.

In the past few days, some of the most interesting news coming out has been centered on Echostar Corp’s (Nasdaq: SATS) power plays. It appears like it’s looking to take control of Sirius XM Radio (Nasdaq: SIRI).

Echostar was rebuffed in December from a takeover offer. Since then, Sirius XM has been struggling to refinance over $1 billion in debt due this year. If it can’t, it’ll look to go into bankruptcy for protection.

But like any good chess match, that hasn’t stopped SATS. They have been quietly buying up large portions of the Sirius’ debt.

To an outsider, that would look like a foolish move – buying up a near-bankrupt company’s debt. But it couldn’t be more brilliant in this case.

In bankruptcy situations, the debt holders are first in line for assets and can dictate terms of a break up. In addition, the bankruptcy will wipe out the remaining debt and equity from stockholders.

If Echostar can get Sirius into bankruptcy, it can walk away from the deal with all of its satellite assets, none of its shareholder obligations and for a low, low, price of a few hundred million. Checkmate.

View original at: Investment Advice and Investment Research with a Contrarian Point of View

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