NEW YORK -- Facing a likely bankruptcy, Sirius XM Radio Inc. found a savior in Liberty Media Corp., which will lend $530 million to the satellite radio provider and block a bid for control that had been waged by a rival both companies share: Dish Network Corp. chief executive officer Charlie Ergen.

Sirius had warned it could file for bankruptcy as early as Tuesday if it could not successfully negotiate with its debt holders.

Sirius XM Radio has 20 million subscribers who use the service to listen to sports, music and talk, including Howard Stern's show, which Sirius landed with a five-year, $500 million contract that could have been terminated in a bankruptcy.

The company found itself on the brink as credit markets dried up and auto sales plunged -- a critical factor for Sirius because many new subscribers buy the service in package offers with cars and trucks.

The crisis brought Sirius chief executive Mel Karmazin into a standoff with Ergen, who bought up much of the batch of debt that was coming due Tuesday and offered capital infusions and a restructuring of the loans in return for control of the company.

That would likely have meant Karmazin's ouster, but he appears to have found an alternative -- in Liberty Chairman John Malone -- in time to stave off a Chapter 11 filing.

Karmazin and Ergen have squabbled before, including when Karmazin headed Viacom Inc. and fought with Dish over the fees for carrying Viacom channels. Malone is also a rival of Ergen's, since Liberty controls satellite TV provider DirecTV Group Inc., which competes with Ergen's Dish.

However, Liberty said its deal with Sirius will not be made by its Liberty Entertainment unit, which includes DirecTV. Liberty plans to spin off a portion of the business into a separate, publicly traded company.

Sirius shares were up 7 cents, or 70 percent, at 18 cents in afternoon trading.

Representatives for Ergen did not return messages seeking comment.

As part of the deal announced Tuesday, Liberty will provide a $280 million senior secured loan to Sirius, $250 million of which will be funded on Tuesday. Sirius will use the proceeds of the loan to repay $172 million of its maturing 2.5 percent convertible notes that had been due. The rest will be used for general corporate purposes.

The loan from Liberty bears a 15 percent interest rate and matures in December 2012.

The second phase of Liberty's investment provides another loan of $150 million to Sirius XM. Liberty has also agreed to offer to buy up to $100 million of the loans outstanding under Sirius XM's existing credit facilities.

In exchange, Liberty will get 12.5 million shares of preferred stock convertible into 40 percent of Sirius' common shares, and two seats on the company's board. The company said it expects the seats to go to Malone and Liberty Chief Executive Greg Maffei.

"By strengthening our capital structure and enhancing our financial flexibility, this investment allows us to continue providing the great content and innovative programming our subscribers know and love," Karmazin said in a statement.

But while the deal has bought Sirius time, analysts said it will not solve all its problems or ensure the company remains independent.

Argus Research Co. analyst Joseph Bonner said the terms give Liberty a foothold toward a possible takeover of Sirius, which has two more major debt payments this year and is still struggling to gain subscribers in the recession.

"Undoubtedly Sirius will continue to struggle," he said.

For Liberty, the deal makes clear financial sense, providing a hefty 15 percent return on its loans. The other advantages of Liberty's stake in Sirius are less certain, but one long-term option might be to convert Sirius' satellites to provide video.

"Reconfiguring the satellites up in the orbit and using them to provide satellite television is going to be very difficult, but it can be done," Standard and Poor's analyst Tuna Amobi said.