Wednesday, February 18, 2009

Sirius Satellite Radio Receives A $530 Million Dollar Loan Bailout from Liberty Media...

A page was taken right out of how free market capitol economies work and was put on full display yesterday when Liberty Media loaned Sirius/XM Satellite Radio $530 Million Dollars. Mel Karmazin working the phones between The Dish Network and Liberty Media to assist in resolving the Satellite Radio company from defaulting on a $175 Million Dollar loan that was due yesterday was dealt some breathing room.
Liberty Media will receive a 40% equity stake in Sirius/XM Radio, which will make it the largest shareholder and receive up to at least three board seats. The money should allow Sirius enough capitol to pay off additional bonds due in May 2009 of $350 Million Dollars. The cash infusion sent Sirius stock up $0.06 cents to $0.16 cents from $0.10 cents, the company still has a long road to impress Wall Street and investors that it is on a path to profitability. The company has never been profitable although it does boast 20 Million subscribers and over $2 Billion Dollars in revenue. It is saddled by huge debt that it is trying to service including another $400 Million Dollars due in December 2009.
The $530 Million Dollar loan comes with a hefty interest rate of 15%, and is being paid in two stages as conditions for the second stage of the loan has certain restrictions that would allow Liberty to back out of the deal. Liberty infused $250 Million Dollars now and the second stage will become due provided that the company doesn't financially collapse in the near term before it is due.
Sirius has some serious restructuring to do to meet its obligations, including overall financial responsibility and looking at its programing and capitalizing on its real opportunity of giving consumers real choices with emerging technologies that would allow the operator to be on the forefront of radio programming as it can do what terrestrial radio cannot because of the capabilities of satellite and its subscriber base.
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