Quick Update: Sirius XM Radio

Here is an update on the Sirius XM Radio (SIRI) situation:

From the FT:

John Malone’s Liberty Media offered $250m in a senior secured loan on Tuesday as the first step in a “multi-stage” deal to rescue Sirius XM ahead of an imminent debt deadline, the companies said in a statement.

The deal offered by Liberty involves a debt for equity swap and leaves Mr Malone’s group, which controls DirecTV , the US satellite television company, with a “meaningful” stake in Sirius, one person familiar with the satellite radio group’s discussions said ahead of the deal.

The $530m transaction will occur in two phases beginning with Tuesday’s infusion which is part of a larger $280m senior secured loan. That will be used for Sirius XM to repay $171.6m of its debt that comes due on Tuesday, with the balance to cover working capital and transaction costs. The loan bears a 15 per cent interest rate that will mature in December 2012.

In the second phase of the deal Liberty will provide a $150m loan to XM Satellite Radio and will offer to purchase up to $100m of its outstanding loans. At that point Sirius will issue Liberty 12.5m shares of preferred convertible stock and Liberty will take seats on the Sirius board of directors.

“We are pleased to have come to this agreement with Liberty Media, particularly in light of today’s challenging credit markets,” Mel Karmazin, Sirius’s chief executive said in a statement.

Liberty’s offer aims to thwart the advances of Charlie Ergen, chief executive of EchoStar and Dish Communications, the US satellite broadcasters, which offered to buy Sirius last year.

This reads like a “Tony Soprano Deal” because not only will John Malone end up with a large stake in the company, but he’s charging Sirius-XM an interest rate of 15% in a zero interest rate environment. All of this begs the question: what were the terms of Charles Ergen’s deal if the John Malone deal was more appealing? Mind you in all likelihood there were some personal and control issues at play in addition to pure financial ones, but I still wonder.

You can read more here.

Source:

The Financial Times: “Malone comes to aid of Sirius” — Kenneth Li, Andrew Edgecliffe-Johnson, February 16, 2009

Disclosure: at the time of publishing the author didn’t own a position in any of the companies mentioned in this article; the ideas expressed are solely the opinions of the author and shouldn’t be viewed as financial or investment advice.

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