Inside Malone’s Sirius-ly Good Deal


If Sirius XM can survive a little longer, John Malone might have gotten himself one sweet deal – with an end-run around shareholder approval, of course — for saving it.

All Mel Karmazin seems to get is the chance to find another pigeon by April 15. And if Sirius’ auditors smell anything bad, Malone can walk away.

According to Sirius’ 8-K and a parsing by Dealbook, the deal is really two distinct deals. The first part is made up of loans of $250 million and a $30 million that pay Malone 15% a year and mature in Dec. 2012.

The other transaction is where Malone gets his juice (and Sirius boss Karmazin gets a bit of breathing room if he wants to find another suitor).

In a credit agreement between a Sirius subsidiary –the former XM Satellite Radio – Malone provides a $150 million term loan with an interest at an annual rate of 15 per cent, maturing on May 1, 2011.

But there are strings here. XM must extend the terms of other credit deals, Malone’s Liberty must buy up another $100 million of its debt in the open market and Sirius’ 2008 audit must not have a hint of any “going concern” issues that mean it will need another dollop of cash.

That second loan also gives Malone a 40 per cent stake in Sirius, wangling around required shareholder approval by categorising the deal as one in which a delay would jeopardize the company’s future.

The DealProfessor’s breakdown on this part:

The mechanics of the issuance of the 40 per cent stake in Sirius is where it gets interesting. Liberty Media is receiving 12.5 million shares of convertible preferred stock in Sirius in connection with the loans. Upon antitrust clearance, the stock becomes convertible into common stock of Sirius.

Ah, but before that conversion happens, everyone must satisfy the debt conditions or else by April or Mel can go back into the market for a better deal.

The whole 8-K is here.