Sirius XM / Liberty Reach Deal

**Scott Greczkowski** · #1 (**permalink**) 02-17-2009, 08:18 AM

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SIRIUS XM Radio and Liberty Media Reach Agreement for Investment

NEW YORK and ENGLEWOOD, Colo., Feb 17, 2009 /PRNewswire via COMTEX News Network/ -- Liberty Makes Loan to SIRIUS XM to Repay 2 1/2% Convertible Notes due February 17, 2009

Agreement Provides for Additional Loan

Liberty to Acquire SIRIUS XM Preferred Stock and Board Representation in Connection with Investments

NEW YORK and ENGLEWOOD, Colo., Feb. 17 /PRNewswire-FirstCall/ -- SIRIUS XM Radio Inc. (Nasdaq: SIRI) and Liberty Media Corporation (Nasdaq: LINTA, LINTB, LCAPA, LCAPB, LMDIA, LMDIB) today announced that they have entered into agreements pursuant to which Liberty will invest an aggregate of $530 million in the form of loans to SIRIUS XM and its subsidiaries and receive an equity interest in SIRIUS XM.

Under the terms of the agreements, the investments will be funded in two separate phases.
-- The first phase includes a $280 million senior secured loan from Liberty to SIRIUS XM, $250 million of which will be funded today. The proceeds of that loan will be used by SIRIUS XM to repay $171.6 million of its maturing 2 1/2% Convertible Notes due February 17, 2009, and the balance will be used for general corporate purposes, including working capital and transaction costs. The loan will bear interest at a rate of 15%, mature in December 2012, and be secured by the assets securing SIRIUS XM's existing term credit agreement. -- The second phase provides an additional loan of $150 million to XM Satellite Radio, SIRIUS XM's wholly owned subsidiary. Liberty has also agreed to offer to purchase up to $100 million of the loans outstanding under XM Satellite Radio's existing credit facilities from the lenders.Upon completion of the second phase of the Liberty investments, SIRIUS XM will issue Liberty an aggregate of 12.5 million shares of preferred stock convertible into 40% of the common stock of SIRIUS XM. In addition, Liberty will receive seats on the SIRIUS XM Board of Directors proportionate to its equity ownership. It is expected that John Malone and Greg Maffei will join the SIRIUS XM Board of Directors. Liberty's obligation to consummate the second phase of its investment is subject to various closing conditions.

Mel Karmazin, Chief Executive Officer of SIRIUS XM Radio, said, "We are pleased to have come to this agreement with Liberty Media, particularly in light of today's challenging credit markets. 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."

"We are excited to be investing in SIRIUS XM. We have been impressed with the company, its operations and management team," said Greg Maffei, president and CEO of Liberty. "SIRIUS XM's ability to grow subscribers and revenue in a difficult financial and auto market is indicative of how listeners view this as a "must have" service."

The agreements, and the transactions contemplated by the agreements, do not constitute a change in control for SIRIUS XM under its outstanding debt instruments and are not subject to the approval of the Federal Communications Commission. The receipt by Liberty of voting stock is subject to expiration of the applicable waiting period under the Hart-Scott-Rodino Act.
Important details of the agreements relating to this investment will be available on a Current Report on Form 8-K which SIRIUS XM expects to file with the Securities and Exchange Commission.

Liberty has advised that its investment will be attributed to the Liberty Capital group and is not expected to affect the timing of the previously announced split-off of a portion of Liberty Entertainment.

dmendenjr · #2 (**permalink**) 02-17-2009, 08:28 AM

I am completely ignorant on the matter, but didn't Charlie buy up SIRIUS XM's bad debt? So if he inherited the bad debt at pennies on the dollar and Liberty gives SIRIUS XM money to pay off the debt; did Liberty just give Charlie a nice little pay day? (mind you not the take over of the sat radio service, but still a postive ROI)?

jwgreen68 · #3 (**permalink**) 02-17-2009, 08:29 AM

Very interesting. In the short term, Liberty is more or less giving their competitor a big chunk of change in order to ensure that E* doesn't take over. But, Sirius XM will more or less be in the same predictament, they'll just owe the money, plus some, to Directv. This process will never end unless they do some serious restructuring, cut costs, and spend more wisely; or eventually become bankrupt.

**Scott Greczkowski** · #4 (**permalink**) 02-17-2009, 08:30 AM

Yes they did. But I am not sure it was the outcome he wanted.

ChiefIlliniwek · #5 (**permalink**) 02-17-2009, 08:44 AM

Once again, Charlie has been marginalized by Fox and DirectTV.

sundude90 · #6 (**permalink**) 02-17-2009, 08:57 AM

Does what does Directv/ Liberty get out of this deal?

goaliebob99 · #7 (**permalink**) 02-17-2009, 09:06 AM

Quote:

Originally Posted by jwgreen68

Very interesting. In the short term, Liberty is more or less giving their competitor a big chunk of change in order to ensure that E* doesn't take over. But, Sirius XM will more or less be in the same predictament, they'll just owe the money, plus some, to Directv. This process will never end unless they do some serious restructuring, cut costs, and spend more wisely; or eventually become bankrupt.

Wasnt this the same snowball type stuff that people do anyhow (restructuring debt) that gets them worse in debt and then they eventually file for bankruptcy anyhow?

Stargazer · #8 (**permalink**) 02-17-2009, 09:23 AM

Lets see here, Charlie buys the debt for pennies on the dollar and would either get the company or gets paid off. Liberty gets the company so Charlie gets paid off. Sirius XM if it were to go bankrupt again maybe Charlie will bid on the bad debts again or Liberty will do what Charlie was planning to do with the company.

fredp · #9 (**permalink**) 02-17-2009, 09:35 AM

So what happens now? BAU? Does Charlie go off and lick his wounds or pulls a VOOM stunt...

navychop · #10 (**permalink**) 02-17-2009, 09:45 AM

Quote:

Originally Posted by ChiefIlliniwek

Once again, Charlie has been marginalized by Fox and DirectTV.

Except he walks away with more cash in his pocket. Charlie just turned a tidy profit in a very short time. And he can still make a run on them later, when they approach the next two debt deadlines. May? & December.