John Malone’s Liberty Media is offering Sirius XM a bridge loan of several hundred million dollars to help the nearly insolvent satellite-radio company pay off debt that matures Tuesday, The Post has learned.
According to a source close to the situation, the loan is part of a two-step approach that Liberty wants to take as it looks to bail out Sirius XM, which is struggling to make its debt payment and fend off takeover maneuvers from EchoStar CEO Charlie Ergen.
As part of the plan, Liberty would provide Sirius XM CEO Mel Karmazin with enough cash to repay $175 million in debt that Ergen currently holds and is due Tuesday. That would give Liberty three months to come up with a plan to restructure Sirius XM’s roughly $600 million in debt that comes due in May and December.
One scenario could involve Liberty borrowing from Ergen’s playbook by buying up Sirius XM debt on the open market. Another involves Liberty making a pitch directly to Sirius XM’s bondholders.
The latter option would be complicated by the fact that Ergen also holds some of Sirius XM’s debt due in May and December, and sources said any refinancing proposal would likely have to include a sizeable premium in order for him to step aside.
Representatives for Sirius XM and Liberty declined to comment.
Liberty’s proposal comes as Sirius XM is pursuing parallel deal talks with Ergen, who has also offered to give the company cash and to restructure the remaining debt he holds in return for control of the company.
Sources said Liberty’s offer isn’t contingent on its taking control.
Absent a deal with either Liberty or EchoStar, Sirius XM would be forced to file for Chapter 11 bankruptcy protection as soon as Tuesday.
Few deal makers are as deliberate and methodical as Malone – or as financially astute – and Liberty is taking the two-step approach in part because Malone is weary of the landmines that might lurk in Sirius XM’s capital structure.
“Sirius XM’s capital structure is fiendishly complicated,” said a source involved in the negotiations.
Indeed, the source noted that while the operations of Sirius and XM have been merged, both companies still maintain separate balance sheets.
“The beautiful thing about Liberty is that one side of its brain is looking at this like a distressed bond investor and if they can make a little money that’s fine,” the source said. “The other side of its brain is looking at this like a strategic buyer, and if they can get access to the assets, that’s fine, too.”
Separately, Sirius XM said yesterday that it exchanged $172.5 million of the $400 million convertible bonds due in December for a new series of bonds due in June 2011. peter.lauria@nypost.com