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DEAL WITH LIBERTY WILL KEEP SIRIUS XM FLYING

By
Peter Lauria
Published Feb. 17, 2009, 6:48 a.m. ET

John Malone’s Liberty Media is expected to announce today a deal to provide a senior secured loan of between $250 million and $300 million to Sirius XM, The Post has learned.

The loan is part of a two-step process that will save the insolvent satellite-radio operator from filing for bankruptcy. It will also provide Sirius XM with enough cash to repay the $175 million in debt held by EchoStar CEO Charlie Ergen that matures today.

Talks between Sirius XM and Liberty, which owns the nation’s largest satellite-television provider, DirecTV, were still ongoing as of late last night, and sources cautioned that either side could walk away from the deal at the last minute.

Representatives for Sirius XM and Liberty did not return calls seeking comment.

Liberty is receiving financial advice from UBS and legal advice from Baker Botts. Sirius XM is receiving financial advice from JPMorgan and Evercore Partners, and legal advice from Simpson Thacher & Bartlett.

A source close to the deal said the secured loan is being made without either equity or conditions. But future stages of Malone’s investment will feature conditions that Sirius XM must meet in exchange for Liberty obtaining a sizable minority stake in the company.

“Liberty’s offer is being made in partnership with and in support of Sirius XM management,” the source said, noting that Sirius XM CEO Mel Karmazin will maintain operating control of the company under Liberty’s proposal.

Ergen had offered to inject Sirius XM with cash, and restructure the remaining debt he holds, in return for control.

The source said Liberty has already come up with a plan for restructuring Sirius XM’s roughly $600 million in remaining debt, which matures in May and in December.

Liberty will detail how it plans to “accommodate for that resolution” in today’s announcement, the source said, but added that future stages of the company’s proposal are contingent on Sirius XM meeting the conditions spelled out by Liberty.

Ergen also holds some of Sirius XM’s remaining debt, but it is junior to Liberty’s loan and that of other lenders.

Not unlike the debt exchange Sirius XM announced last week, the source said Liberty’s refinancing proposal is likely to include a premium in the form of higher interest rates to all bondholders, including Ergen.