FEBRUARY 17, 2009, 9:25 A.M. ET Liberty Media Enters Sirius Deal
By KERRY E. GRACE Wall Street Journal http://online.wsj.com/article/SB123487747451699423.html?mod=testMod Liberty Media Corp. agreed to invest $530 million in the form of loans, including $250 million on Tuesday, for Sirius XM Radio Inc. in exchange for stock and seats on the board of the embattled satellite-radio operator. Sirius XM had said several times it could file for bankruptcy as early as Tuesday if it couldn't reach a deal on its debt. Those obligations include bonds that are majority-owned by satellite mogul Charles Ergen and mature Tuesday. Sirius XM's shares more than doubled in premarket trading to 22 cents apiece. The stock has lost more than half its value in the last three months and 97% of its value in the last year amid concern about its debt load. The deal would end up giving Liberty 12.5 million shares of preferred stock, convertible into 40% of the company's common stock. Liberty, which is controlled by John Malone, will also receive seats on Sirius XM's board. Mr. Malone is expected to be one of the new board members. Under the agreement, Sirius XM will get a $280 million senior secured loan from Liberty, $250 million of which will be funded Tuesday. The proceeds will be used to pay down $171.6 million of debt due Tuesday, with the rest going to general purposes like working capital. The second phase of the plan provides a loan of $150 million to XM Satellite Radio, acquired last year by Sirius. Liberty has also agreed to offer to buy up to $100 million of the loans outstanding under XM's current credit agreements from lenders. The Wall Street Journal reported last week that Sirius XM had narrowed the divide in negotiations with Mr. Ergen, who controls Dish Network Corp. and EchoStar Corp. over a deal to save itself from bankruptcy, but that it had continued to discuss a rival offer from Liberty. The situation pitted Messrs. Ergen and Malone -- two longtime, asset-swapping rivals in the media business who are both based in Englewood, Colo. -- against each other with Sirius XM Chief Executive Mel Karmazin trying to salvage his equity holdings in the company along with his legacy. After Sirius's merger with rival satellite-operator XM was approved in July, it began planning to refinance its debt. Yet within weeks of the deal's close, the financial crisis began to envelop Wall Street, making it all but impossible for companies to tap the credit markets. Mr. Karmazin, in Tuesday's joint press release from Liberty and Sirius, said: "We are pleased to have come to this agreement with Liberty Media, particularly in light of today's challenging credit markets." -- ================================ George Antunes, Political Science Dept University of Houston; Houston, TX 77204 Voice: 713-743-3923 Fax: 713-743-3927 Mail: antunes at uh dot edu *********************************** * POST TO [email protected] * *********************************** Medianews mailing list [email protected] http://lists.etskywarn.net/mailman/listinfo/medianews
