Key date arrives for Sirius and Liberty Media

The blogosphere is full of gossip and speculation that an upcoming key date, March 7, could be instrumental in taking pay-radio outfit Sirius XM onto its next stage.

Currently the situation is that John Malone’s Liberty Media is – in effect – in control of 40% of Sirius XM (Liberty injected $530m in loans two years ago, convertible into 40% equity). But the deal came with a number of restrictions. Malone/Liberty is subject to a ‘standstill’ until the second anniversary of the cash injection date, ie March 6 2011. After March 6 Liberty can increase its stake to 49.9 percent if it wishes, or go beyond 49.9 percent but with the obligation that it must offer to buy all the remaining stock. On March 7, if it wishes, Liberty is free to sell or – importantly – transfer its existing stake in Sirius-XM to another entity.

One well-placed US commentator is suggesting that one option would be for Malone to do as he has done many times before, which is to then exploit the Sirius-XM losses in a tax-efficient manner, and spin the business off with other Liberty Media assets.

Which is where the conspiracy theorists come in: Malone, and a Liberty subsidiary (Liberty Satellite Radio) owns a very large chunk of net operating losses at Worldspace, now in the end-game as far as its Chapter 11 bankruptcy is concerned. Some close observers are watching (hopefully) the potential for a Sirius and Worldspace link-up, with Malone exploiting those Worldspace losses to help fund new facilities for a global operation. Certainly, new satellites will be needed (although some US capacity is being freed up as new craft come onto station serving the USA and Canada). There’s a new Sirius (FM-6) slated for launch later this year, for example.

Now, all of this is pure speculation, of course, and Dr Malone might leave everything exactly as is, and just celebrate March 6th with a Cherry Soda and a remembrance of a good, and profitable, deal done!