Sirius Is Saved For Now: Liberty Media Invests $530 Million For 40% Ownership

Posted Feb 17, 2009

Liberty Media Corporation, the parent company of DirectTV, has made it easier for Sirius XM satellite radio to stay alive.  Liberty Media has taken a 40% stake in the satellite radio company in exchange for $530 million.  Sirius XM was forced to pay $172 million today to creditors in the form of convertible notes.  Later this year, the company will owe another $750 million in loans.  Therefore the deal with Liberty Media is just a temporary solution.

Liberty will be loaning Sirius XM $280 million with a 15% interest rate.  Sirius will have to pay back Liberty Media the money by December 2012.  Another part of the deal is a $150 million loan to XM radio for help in paying back Echostar, a satellite TV company.  Echostar had expressed interest in acquiring Sirius XM at one point as well.  Liberty also pledged to loan another $100 million to help pay for Sirius XM’s existing loans.

Once all of the loans are made, Liberty Media will get 12.5 million preferred stock shares in the satellite radio company.  Liberty will also have 40% of the seats on Sirius XM’s board of directors.

“We are pleased to have come to this agreement with Liberty Media, particularly in light of today’s challenging credit markets,” stated Sirius XM CEO Mel Karmazin. “Liberty’s investment is an important validation of what Sirius XM has already achieved and a vote of confidence in what we will achieve.  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, this investment allows us to continue providing the great content and innovative programming our subscribers know and love.”