Standard & Poor's Ratings Services said today that its ratings on Liberty Media Corp., including the 'BB+' corporate credit rating, remain on CreditWatch with negative implications, where they were placed on Dec. 15. 2008.

This CreditWatch listing was based on the company's plan to distribute a majority of its Liberty Entertainment tracking stock assets to existing Liberty Entertainment tracking stockholders through the split-off of a newly formed subsidiary, Liberty Entertainment Inc. (LMEI). LMEI will comprise Liberty's entire 52% interest in the DIRECTV Group Inc. (DTV), its 50% interest in GSN LLC, 100% of FUN Technologies, and 100% of Liberty Sports Holdings Inc. LMEI will also be the obligor on about $2 billion of derivative borrowings. Upon completion of the split-off (expected in the second quarter of 2009), we expect to lower our corporate credit rating on Liberty Media to 'BB-' with a negative outlook.

This CreditWatch update follows the announcement that Liberty Media and SIRIUS XM Radio Inc. have entered into an agreement under which Liberty Media will invest a total of $500 million, after fees, in the form of loans to SIRIUS XM and receive a preferred equity interest convertible into a 40% stake in SIRIUS XM. The investment will be funded in two phases. The first phase includes a $280 million senior secured loan. SIRIUS XM will use the proceeds to repay $171.6 million of its maturing 2.5% convertible notes due Feb. 17, 2009, and the balance for general corporate purposes. The loan will bear interest a rate of 15%, maturing in December 2012, and be secured by the assets securing SIRIUS XM's existing term credit facility. The second phase will provide an additional $150 million loan to XM Satellite Radio, SIRIUS XM's wholly owned subsidiary. In addition, Liberty Media agreed to offer to purchase up to $100 million of the loans outstanding under XM Satellite Radio's existing credit facilities. Upon completion of the second phase of the Liberty investment, SIRIUS XM will issue Liberty an aggregate of 12.5 million shares of preferred stock convertible into 40% of the common stock of SIRIUS XM. Liberty's obligation to consummate the second phase of its investment is subject to various closing conditions.

"Liberty Media's investment in SIRIUS XM currently does not affect our prospective rating outcome following the split-off of LMEI," said Standard & Poor's credit analyst Andy Liu. "We still expect to lower our rating on Liberty Media to 'BB-' with a negative outlook. However, given that SIRIUS faces maturities above and beyond Liberty Media's investment, as well as significant operating challenges, a further financial commitment by Liberty Media could affect our rating on the company."

Upon completion of the split-off, we will review the final terms before resolving the CreditWatch listing. If the split-off is completed according to the current plan, we will implement the outlined rating action. If there are substantial changes to the split-off, we will review the new structure in determining the new rating outcome.