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VIDEOLiberty Media Frees Sirius from Bankruptcy
By
Scott Reeves Feb 17, 2009 1:30 pm
Brief scrutiny of today's headlines.
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In exchange, Liberty Media will receive 12.5 million shares of preferred stock convertible to 40% of Sirius XM's common stock and a proportionate number of seats on the board of directors. The loan carries a 15% interest rate and is due December 2012.
The companies said Sirius XM Radio will receive a $280 million loan, including $250 million to be funded today. The satellite-radio company will use to money to repay convertible notes. The balance will be used for working capital.
In addition, Liberty agreed to loan an additional $150 million and buy as much as $100 million in outstanding debt. Last week, Sirius said it might be forced to file for bankruptcy protection if it couldn't restructure its debt. The company is run by Mel Karmazin; the bonds are held by EchoStar (DISH).
Satellite radio offers about 300 channels of CD-quality music, news and talk, including Howard Stern and Oprah Winfrey. The subscription service also carries the National Football League, Major League Baseball, National Basketball Association, National Hockey League, PGA Tour and major college sports. Sirius Backseat TV offers the first live in-car rear-seat entertainment and XM NavTraffic provides GPS navigation systems.
The company has about 18.5 million subscribers, but the basic problem may be that many people listen to the radio as background noise, especially when driving. For them, it makes no sense to pay for a service that's available for free via terrestrial radio.
Sirius XM Radio's stock recently fetched $0.21 a share, up about 100% on the news of Liberty's investment.
Whoopie.
No positions in stocks mentioned.
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