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Sirius XM Reaches Investment Deal With Liberty

By Dealbook February 17, 2009 8:30 amFebruary 17, 2009 8:30 am

Sirius XM, the embattled satellite radio company, said early Tuesday that it reached an 11th-hour deal with Liberty Media that will allow it to repay maturing debt and avoid a bankruptcy filing, at least for the moment.

The last-minute deal parries an aggressive move by EchoStar, which owns the Dish Network and had been buying Sirius’s debt in hopes of taking control of the company if it defaulted. It calls for a total of $530 million in loans from Liberty Media, the media group controlled by John C. Malone, which will get preferred stock convertible into 40 percent of Sirius’s common equity, the companies said in a statement on Tuesday.

Mr. Malone, who is Liberty’s chairman, and Greg Maffei, Liberty’s president and chief executive, are expected to join Sirius’s board as part of the deal.

The investment pact came after a week of fast-paced negotiations by Mel Karmazin, the head of Sirius, which was formed out of the merger of two rival satellite radio providers. In clinching the loans, Andrew Ross Sorkin commented in his DealBook column published on Tuesday, Mr. Karmazin managed to save his company and his job “by pitting some of the most hard-nosed negotiators in the business against each other.”

“We are pleased to have come to this agreement with Liberty Media, particularly in light of today’s challenging credit markets,” Mr. Karmazin said in the statement.

Mr. Maffei, who once was chief financial officer at Microsoft, said that “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.”

Liberty’s investment will come in two phases, the first part consisting of a $280 million loan, and the second part consisting of a $150 million loan and an agreement to buy an additional $100 million in loans from other lenders. At the completion of the second phase, Liberty will get 12.5 million preferred shares convertible into a 40 percent common equity stake, the companies said.

Liberty will get seats on the board in the same proportion as its equity interest, the companies said.

Lose Howard and his 50 million dollar salary. He is no longer worth it. He has few star power guests, Artie is just depressing and no longer that funny. Keep Robin and give her the news show.
Howard Stern has become an expensive anchor bringing the satellite down.

I use the service and enjoy it. It’s helpful (intercity traffic reports along the I95 corridor, for example) and also informative (excellent public radio talk programs that one may not get locally, such as Leonard Lopate show, WNYC).

Too bad they never put together a convincing argument for potential subscribers. Talk about taking a winning idea and letting it rot on the vine! What a shame.

These people just don’t get it. People today have the ability to get their own music and talk, and tailor it to their own lifestyles, and take it with them wherever they go. Sirius and XM were so twentieth century, and Karmazin despite some intelligent moves in the past, seems still to be living there…These folks seem to be as sharp and with it, as the captains of finance and industry, in their well fitted suits, who are clueless to what a good loan is, and fly to Washington to go begging for our hard earned money, in their private jets. Hello!

I hope they stay on the air…I really enjoy the major league baseball games during the spring and summer not to mention all the commercial free music. I have it on most all day long at work and just upgraded to a lifetime subscription.

Cancel if you can . . . for some of us, this is the only way to get any radio at all, out here in the boonies, the deep canyons and high mountains. It’s a must-have for me because there are no other options.

The music on satellite radio has become so homogenized, it’s as if ClearChannel has been given the keys. There are so many overlapping stations of uninspired music that I could just as easily find on FM stations now. Instead of paying high salaries to Howard, Oprah, Martha and MLB, hire the best music programmers for each music genre and get out of the way to let them do their thing.

If satellite radio remains mediocre, then I’ll probably abandon it and turn to HD radio or the more promising internet radio.

Might have been better to file and get courts to cancel all the overblown contracts…starting with Howard (not relevant in scope any longer) MLB/NFL, Oprah etc. Now, they’ve been thrown a life buoy, but the bloated payments are still coming…the waves are gonna get much bigger.

Just because a service works doesn’t mean it is a “must have” or a format with a future. Free HD and internet radio will kill off satellite radio unless they can come up with a new revenue source or business plan. Satellite radio as it is now is a dying format, soon to join the ranks of betamax, laser discs, 8-tracks, etc.

I don’t see how satellite radio can compete long term with an MP3 player plugged into a car’s USB slot or an Aux hookup in the car CD player. The net is such a superior delivery mechanism, and the MP3 player provides storage on top of that. And I don’t think their content is enough to make people buy the delivery system. Malone is good at winning a negotiation in a zero-sum game, but here he’s entering a negative sum game.

Terrestial radio has been purchased 90 per cent by right wing leaning owners. Just about the only place you can hear “lefty radio” in on XM Radio. I liked riding to work and home again listening to political discussion with a progressive slant, and that is why i subscribed and continue to do so.

After using Sirius for the last year, I CANT stand FM radio. Those stupid annoying commercials that belittle you. I dont want to hear how I can go to this medical center, and get this card, etc. I hear that enough on my TV. Satellite radio should be the future, is the future. No commercials (other than their little 5sec self advertising ones). I don’t listen to Stern or others, just music and plenty of music it has.

“Too bad they never put together a convincing argument for potential subscribers. Talk about taking a winning idea and letting it rot on the vine! What a shame.”

There isn’t a convincing argument to get enough people to pay for radio on the scale necessary to make it profitable. Only people who are in their cars want it, and unless you have a long commute you’re just not listening to the radio for that long. When you do listen to the radio, you want local news, local weather, and local traffic, none of which are supplied well by satellite radio.

The whole thing was doomed to fail from the start. Now that people are looking to save money where they can, paying $180 per year to listen to the radio seems ridiculously extravagant.

I’ve subscribed to Sirius for four years and love the music programming. The thought of going back to terrestrial radio is too horrible to contemplate. Who knows if satellite radio will survive long term, but you have to admire Mr. Karmazin’s skills.

Stern’s salary is 500 million for five years. XM-Sirius dropped the Lopate show months ago. When internet service is standard in new cars, satellite radio will be irrelevant (once new cars start selling again).