Feb. 17 (Bloomberg) -- Sirius XM Radio Inc., the satellite broadcaster, will receive $530 million in loans from John Malone’s Liberty Media Corp. in exchange for board seats and an equity stake, avoiding a bankruptcy filing.

Sirius XM will first get $280 million and use part of the financing to repay convertible bonds due today, the companies said in a statement. Liberty also agreed to offer to purchase as much as $100 million in outstanding loans and to lend New York- based Sirius XM an additional $150 million. Sirius XM rose 53 percent to 16 cents at 4 p.m. in Nasdaq Stock Market trading.

The company, run by Mel Karmazin, said Feb. 13 it might have to file for bankruptcy as soon as today if it couldn’t reach an agreement to restructure its debt. The bonds due today are held by Charles Ergen’s EchoStar Corp., which had been buying Sirius XM debt after the broadcaster rejected its unsolicited bid, according to a person familiar with the plan.

“Sirius is in the process of getting out of the woods because Liberty is putting up a lot of money,” David Joyce, an analyst with Miller Tabak & Co., said in an interview today. “It shows that Sirius will be around for a long time.”

Joyce, based in New York, recommends investors sell the shares and doesn’t own any.

Sirius XM has about $3.25 billion in total debt. U.S. auto sales have slumped in the past months, cutting demand for radios pre-installed in cars.

Sirius XM’s $500 million of 9.625 percent notes due in 2013 jumped 5 cents to 51 cents on the dollar at 1:24 p.m. in New York, according to Trace, the bond-pricing service of the Financial Industry Regulatory Authority. The bonds, which traded at 79 cents on the dollar in August, began falling in September to a low of 18.5 cents in December.

Media Billionaires

Karmazin, 65, pitted Malone and Ergen, two media billionaires based in Englewood, Colorado, against each other to save the company he formed seven months earlier. Through Liberty, Malone controls DirecTV Group Inc., the largest U.S. satellite-TV broadcaster. EchoStar is the satellite-equipment company separated from Ergen’s Dish Network Corp., DirecTV’s rival.

“We believe that Liberty views this transaction primarily as an attractive financial investment” and doesn’t plan to be closely involved in Sirius XM’s operation nor to attempt a combination with DirecTV, Vijay Jayant, a New York-based analyst with Barclays Capital Inc., said today in a note to investors.

The agreement allows Karmazin to keep his job as CEO. A group of Sirius XM creditors said yesterday it planned to seek his removal if the company filed for bankruptcy instead of making a deal to remain solvent.

Malone on Board

The loan, secured by Sirius XM’s assets, will have an interest rate of 15 percent and mature in December 2012. After the second loan is completed, Sirius XM will issue Liberty 12.5 million shares in preferred stock convertible into 40 percent of Sirius XM common stock. Sirius XM will pay Liberty $7 million in termination fees if its board ends the deal.

Malone and Liberty Chief Executive Officer Greg Maffei will join Sirius XM’s board. Liberty agreed not to buy more than 49.9 percent of its outstanding common stock for three years, according to a regulatory filing.

UBS AG, Switzerland’s largest investment bank, advised Liberty on the deal. JPMorgan Chase & Co., based in New York, and Evercore Partners Inc. advised Sirius XM.

Karmazin completed the merger of Sirius and XM, the only two U.S. pay-radio providers, in July, after the credit-market crisis took hold. The stock has traded for less than $1 a share since September as investors became concerned that Karmazin wouldn’t be able to manage the debt or meet growth projections.

DirecTV Control

Over the decades, Malone and Ergen have competed for customers and companies. In 2003, Ergen, 55, abandoned a bid for DirecTV’s then-parent company, Hughes Electronics Corp.

Malone gained control of DirecTV last year after buying out News Corp.’s stake. Rupert Murdoch’s News Corp. had bought the stake in 2003, after Ergen dropped his bid on DirecTV’s parent company because he couldn’t get regulatory approval.

Sirius XM, which lured customers with programs including talk-show host Howard Stern and the National Football League, has more than 18.9 million subscribers.

Ergen’s Dish Network had 13.8 million customers as of Sept. 30, trailing DirecTV’s 17.3 million.

To contact the reporter on this story: Cecile Daurat at cdaurat@bloomberg.netJames Callan in New York at jcallan2@bloomberg.net.

Last Updated: February 17, 2009 16:12 EST