Liberty Buying Into Sirius
John Malone's Liberty Media Lending Sirius XM $530M
by Kent Gibbons -- Multichannel News, 2/17/2009 8:08:09 AM
John Malone's Liberty Media is investing $530 million in Sirius XM Radio, a deal that will result in Liberty owning 40% equity in the satellite-radio provider, the companies said.
The deal was expected as Sirius XM CEO Mel Karmazin sought Malone's help in fending off takeover efforts by EchoStar Communications. The loans from Liberty will first be used to pay off $171.6 million in Sirius XM debt held by EchoStar that comes due today. Sirius XM will get the first $250 million of the loans today, the companies said.
The companies said the loans will come in two parts.
From the release: 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 2.5% convertible notes due Feb. 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.
Liberty will receive seats on the Sirius XM board of directors proportionate to its equity ownership. It is expected that [Liberty chairman] John Malone and [Liberty CEO] Greg Maffei will join the Sirius XM board. Liberty's obligation to consummate the second phase of its investment is subject to various closing conditions.
Said Karmazin in the release: "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."
Said Maffei in the release: "We are excited to be investing in Sirius XM. We have been impressed with the company, its operations and management team. 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.
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