Thanks to an infusion of cash from Liberty Media, Sirius XM will not file for bankruptcy. Under the terms of the agreement, Liberty, a conglomerate that also owns QVC, Expedia and a 48 percent take in DirecTV will invest up to $530 million via two payments to the beleaguered satellite radio company. In exchange, Liberty will get a minority stake of the company and 12.5 million preferred shares of Sirius XM stock that is currently worth 17 cents per share. Sirius XM has struggled to pay off its debt since the two companies merged in November 2008. In January, news broke that the service would raise its subscription rates in an attempt to scrounge up some cash.
Had the deal with Liberty Media not been struck, Sirius XM likely would have filed for Chapter 11 bankruptcy as early as today and contracts with marquee talent like Howard Stern and Martha Stewart might be in jeopardy. Since bankruptcy has been avoided, Sirius CEO Mel Karmazin will keep his post atop the company. “Liberty’s investment is an important validation of what Sirius XM has already achieved and a vote of confidence in what we will achieve,” Karmazin said. “This agreement enables Sirius XM to continue to develop the opportunities first outlined in the merger of Sirius and XM.”
Technology company Echostar was initially in talks to take over Sirius XM (Echostar bought up a chunk of Sirius XM’s debt), but Karmazin and EchoStar chief executive Charlie Ergen couldn’t agree to terms on a deal that would hand the reins to EchoStar.