Sirius XM's deal with Liberty Media gives it an "out"

Instead of filing for bankruptcy protection or possibly folding altogether, the satellite radio company stands to gain a $530 million investment from Liberty while giving away a 40% stake in itself. For some reason, Liberty loves satellite. It already owns the majority of DirecTV. Now it wants a good chunk of Sirius XM Radio.

The 8K report filed by Sirius XM Radio this week breaks the deal down like this: Sirius XM Radio receives an instant $250 million term loan (at a whopping 15% no less) in addition to $30 million of purchase money loans between the two companies. The $250 disbursement was funded this past Wednesday. But wait, there is more.

XM Radio is actually a subsidiary of parent Sirius Radio, and the second part of the deal gives the XM contingent another $150 million term loan at 15% annually, with full maturity occurring on May 1, 2011. This loan has not closed, and the provisions give Sirius XM Radio a lease on life in which to find more money outside of Liberty Media (good luck with that, board). If Sirius finds another buyer before the XM loan closes, it may have an out from Liberty. Are credit markets going to come around by mid-year to allow this to happen? Or, will some hard cash show up instead from another party? For now, Sirius XM has found a way to escape eviction, but the landlord will come knocking again.