Sirius XM Radio has been saved to broadcast another day by US cable tycoon John Malone.
The financially troubled satellite radio provider was tossed a last-minute lifeline Tuesday by Liberty Media, an entertainment conglomerate chaired by Malone that owns a 50 per cent stake in DirecTV.
A $530m rescue financing deal will stave off Sirius' immediate threat of declaring bankruptcy as well as keep its assets out of the clutches of DirecTV's rival, Dish Network.
Liberty Media said it will inject the $530m loan into Sirius' coffers in two phases; an immediate $280m loan to pay off notes due today and a second round of $150m aimed specifically at the company's XM Satellite subsidiary. Liberty will also offer to purchase up to $100m of XM's loans.
The move blocks a bid by Dish Network CEO Charles Ergen who has been attempting to gain control of Sirius XM through purchasing its distressed debt. Ergen has offered to restructure the loans in return for control of the company, but Sirius XM turned him down.
Instead, Sirius has thrown itself to the mercy of Liberty, which gets 12.5 million shares of preferred Sirius stock convertible into a 40 per cent stake in the company. Liberty also gets 40 per cent of the seats on Sirius XM board of directors. The company said Malone and Liberty CEO Greg Maffei are likely to take those seats.
"We are pleased to have come to this agreement with Liberty Media, particularly in light of today's challenging credit markets," said Sirius XM CEO Mel Karmazin in a statement.
The satellite radio company taken on most of its debt when subscriber growth was booming and before the recession made creditors holding on to their cash for dear life.
Under the deal, Sirius XM will need to pay the Liberty loan at an interest rate of 15 per cent due in December 2012. ®
In which we present the Sirius XM loan in the form of a one act screenplay.
FADE IN: INT. SIRIUS XM HEADQUARTERS IN NEW YORK CITY
|I CAN'T pay the rent!|
|You MUST pay the rent!|
|But I CAN'T pay the rent!|
|But you MUST pay the rent!|
|I'll pay the rent!|
|Drat, drat, and double drat!|
FADE OUT: EVERYONE LIGHTS CIGARS MADE UP OF ROLLED-UP $100 BILLS AND LAUGHS.