Sirius XM Saved By Liberty

Sirius XM (SIRI) avoids bankruptcy by borrowing $530 million from John Malone’s Liberty Media.

The loan terms are steep, and Liberty will get 40% of the satellite radio company when it’s all done. But now Mel Karmazin — assuming he doesn’t get booted — can get back to worrying about his other big problems: Slowing growth, counting on the auto industry for new customers, and increasing competition from mobile radio services.

Sirius XM shares are up 115% in pre-market trading.

The first part of Liberty’s investment is a $280 million loan, $250 million of which will be funded today. That will allow Sirius to pay the $172 million in debt due today — which could have forced the company into bankruptcy. The terms are steep: The loan carries a 15% interest rate.

The second phase is a $150 million loan to XM. Liberty has also agreed to buy up another $100 million of XM debt. After that second phase, Sirius will issue Liberty an aggregate 12.5 million shares of preferred stock convertible into 40% of Sirius XM’s common stock.

Liberty’s Malone and Greg Maffei will likely join the Sirius XM board.

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