DirecTV’s Parent Company Saves Sirius XM

DirecTV’s parent company, Liberty Media, extended a helping-hand to Sirius XM Radio. To prevent the company from claiming bankruptcy, Liberty Media has provided Sirius XM with $530 million in loans. The Englewood, Colorado-based media giant will gain 40% of the company’s common stock, or 12.5 million shares of preferred stock, in addition to 2 seats on Sirius XM’s board of directors.

The Sirius XM bailout by the Chairman of Liberty Media, John Malone, came after Dish Network‘s bid to purchase the company’s distressed debt was denied. In return for control over Sirius XM, Charles Ergen, Chief Executive of Dish Network, offered to streamline the company’s loans. Sirius XM’s Chief Executive, Mel Karmazin, denied the bid.

Among the assets that Liberty Media will acquire are $2 billion in annual revenue and 20 million subscribers who pay for sports, music and talk radio programming, including Howard Stern’s radio show. In addition, DirecTV’s parent company may be entitled to the 12 satellites that Sirius XM is currently operating.

For New-York-based Sirius XM, the loans will provide a temporary relief from debt woes. According to analysts, the transaction may have saved Mel Karmazin’s position as CEO of the company.

Liberty Media agreed to provide the company with $250 million up-front, allowing Sirius XM to neutralize the $175 million in debt that was due on Tuesday. As Sirius XM’s single largest shareholder, Liberty Media now possesses 40% of the company’s equity.

Sirius XM has agreed to repay its debt to Liberty Media by 2012, at the interest rate of 15%. News of the satellite company’s bailout has led to an increase in stock prices. Sirius XM’s shares increased 52.8% on Tuesday afternoon, which is excellent news for new shareholder Liberty Media.