Sirius XM Averts Bankruptcy Through Deal with Liberty Media

Authored by Mark Hefflinger on February 17, 2009 - 8:16am.

Washington - Averting possible bankruptcy, satellite radio provider Sirius XM (NASD: SIRI) on Tuesday reached an 11th-hour deal with Colorado-based Liberty Media (NASD: LINTA), which has agreed to loan the company $530 million in exchange for preferred shares convertible into a 40% equity stake. The deal allows Sirius XM to immediately repay $171.6 million in notes -- mainly owned by Liberty's chief rival, EchoStar (NASD: SATS) -- that were due on Tuesday.

Echostar, the owner of satellite TV firm DISH Network, had been accumulating Sirius XM's debt, with the hopes of eventually gaining control of the company.

It also owns a portion of the $400 million in notes that Sirius XM owes in December.

Looking to trump its rival, however, Liberty, the majority owner of DirecTV, became involved in the discussions in recent days.

In addition to a $280 million loan to Sirius XM and $150 million loan to XM Satellite Radio, which Sirius acquired last year, Liberty has offered to buy up to $100 million of the company's outstanding debt.

"This agreement enables Sirius XM to continue to develop the opportunities first outlined in the merger of Sirius and XM by strengthening our capital structure and enhancing our financial flexibility," said Mel Karmazin, the CEO of Sirius XM.

Last week, the company announced that it had hired special advisors to help it prepare a possible Chapter 11 filing.

http://www.sirius.com