Sirius XM Saved, but Static Continues

Updated from 4:14 p.m. EST

Sirius XM Radio (SIRI) avoided bankruptcy Tuesday, but satellite radio is still in a difficult orbit.

An 11th hour, $530 million financing deal from Liberty Media (LINTA) kept Sirius XM from defaulting on a $171.6 million loan due Tuesday, giving John Malone and company a 40% stake in Sirius.

The pact also kept Sirius XM out of the hands of Dish Network (DISH) CEO Charles Ergen, who had purchased Sirius debt in an attempt to pick up the company's assets cheaply if it had failed.

But all the last minute drama between Liberty Media, which controls DirecTV (DTV), and its satellite rivals, Ergen's EchoStar (SATS) and Dish, fails to fully address Sirius' ongoing saga.

Earlier this decade, when subscriber growth was soaring and credit markets were more freewheeling, Sirius and XM took on $3.4 billion in total debt. The combined Sirius XM expects to spend $1.3 billion in loans and interest toward payments this year.

And then there are the programming costs. Programming is the second highest expense for Sirius XM and eats about 23% of its revenue.

Take these arrangements, among others: A five-year $500 million contract with Howard Stern that expires next year, a $650 million 11-year pact with Major League Baseball, a seven-year $220 million deal with the National Football League and a five-year $107.5 million contract with Nascar.

These programming deals were a legacy from a heady growth period, when Sirius and XM fought to outbid each other for the best radio talent and contracts. Liberty Media's last minute save preserves those contracts, which would likely have been torn up in a bankruptcy restructuring effort.

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