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Liberty Loans Sirius XM $530M

2/17/2009 09:12:00 AM Eastern

New York — Sirius XM and Liberty Media, which owns a controlling interest in DirecTV, announced Liberty will invest a total of $530 million in Sirius XM in loans in exchange for equity in the cash-strapped satellite-radio company as well as seats on its board.

The investments will be funded in two separate phases. The first includes a $280 million senior secured loan from Liberty, $250 million of which will be funded today. Sirius will use that to repay $171.6 million of its debt due today. The balance will be used for general corporate purposes, and the loan will bear interest at a rate of 15 percent and mature in December 2012.

The second phase provides an additional loan of $150 million to XM Satellite Radio, now a wholly owned subsidiary of Sirius.

Upon completion of the second phase of the Liberty investments, Sirius XM will issue Liberty 12.5 million shares of preferred stock convertible into 40 percent of the common stock of Sirius XM. Liberty will also receive seats on the Sirius XM board of directors, and it is expected that John Malone and Greg Maffei will join the board. The deal is subjects to various closing conditions.

Mel Karmazin, CEO of Sirius XM, said, “This agreement enables Sirius XM to continue to develop the opportunities first outlined in the merger of Sirius and XM.”

"We have been impressed with [Sirius XM], its operations and management team. 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,” said Greg Maffei, president and CEO of Liberty.