Mel Karmazin, chief executive of Sirius XM Radio Inc. (SIRI), defended on Thursday his decision-making, saying that it was in the company's best interest to take on a high-interest loan and heavy shareholder dilution from Liberty Media Corp. in order to stave off bankruptcy.

Facing heavy debt maturities last month, Karmazin negotiated with Liberty Media, the media conglomerate controlled by John Malone, for $530 million in the form of high-interest loans in exchange for a 40% equity stake in the company and seats on its board of directors.

"Had we not accomplished this refinancing, I assure you that no one involved with our enterprise would have liked the alternative," Karmazin said during an earnings conference call with analysts on Thursday. "We hate to give up some of the synergies of the merger to higher interest expense, but it was in the best interest of our shareholders to do so."

The company's shares recently traded up 3 cents to 19 cents, down about 94% over the past 12 months.

Sirius XM Radio has resolved its near-term liquidity issues, but it's paying an interest rate of 15% on its loan from Liberty Media as the economic downturn worsens, and Karmazin has been criticized for passing up an opportunity to refinance more than $1 billion in debt last summer after the merger between Sirius and XM was finally completed.

"In this environment, when cash is king and liquidity issues are something to avoid, we were not in a great position," Karmazin said. "Rather than take the time here to review all the trials and tribulations of having to raise money in this environment, I will just say that we got it done, and many, many companies did not get it done."

Karmazin said he would have preferred to have a lower interest rate, but that 15% was acceptable at current market rates.

Now, the company finds itself with higher interest expenses and slowing subscriber growth. On Tuesday, the company reported net new subscriber additions of about 83,000, and, on Thursday, it withdrew its long-term guidance for subscriber growth based on the sharp downturn in the economy. For 2009, it declined to provide guidance on subscriber and revenue growth but said it expects to exceed $300 million in earnings before interest, taxes, depreciation and amortization.

Also, the company will likely find itself with forceful, new voices in its boardroom, with Malone and Liberty Media Chief Executive Greg Maffei expected as directors. The deal with Liberty, which holds a majority stake in DirecTV Group Inc. (DTV), could lead to new alliances between the satellite radio and TV services.

"Accomplishing our financing is a reflection of the confidence that very smart lenders and investors have in our company," Karmazin said. "They see a strong future and long-term benefits to the enterprise as a result of the merger and executing of our business plans."

In the short term, however, satellite radio faces a host of challenges, including a weakening auto sales market, the company's chief source of subscriber growth.

"2009 will be a terrible year for auto sales," Karmazin said. "We obviously anticipated that in our operating plan. We assumed that churn will increase, because consumers are facing challenging times."

The company is also grappling with a plunge in retail sales of satellite radio units.

James Meyer, president of operations with Sirius XM Radio, said the company will roll out an application in the second quarter that will allow subscribers to stream its content through the Internet on popular gadgets like the iPhone and iPod Touch. The company previously discussed these plans in December.

"We have also expanded the number of home devices that can receive our content through the Internet, including an easily used tabletop radio that is now sold through our Web site and major retailers," Meyer said.

Meanwhile, Karmazin said Sirius also will continue to focus on harvesting the merger's cost benefits. In the fourth quarter, the company's total cash operating expenses fell 22%, and its pro forma operating earnings were $31.8 million, compared with a loss of $224.1 million a year earlier.

"As you saw in the [fourth-quarter results], financial discipline gets us through the short term and when auto production goes from 9 to 10 million cars produced to 12 to 13 million cars produced, we will see substantial benefits," Karmazin said.

-By Nat Worden, Dow Jones Newswires; 201-938-5216; nat.worden@dowjones.com