Annual report pursuant to Section 13 and 15(d)

Investments In Affiliates Accounted For Using The Equity Method

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Investments In Affiliates Accounted For Using The Equity Method
12 Months Ended
Dec. 31, 2017
Investments in Affiliates Accounted for Using the Equity Method  
Investments In Affiliates Accounted For Using The Equity Method

(8)  Investments in Affiliates Accounted for Using the Equity Method

Liberty has various investments accounted for using the equity method. The following table includes the Company’s carrying amount and percentage ownership and market value (Level 1) of the more significant investments in affiliates at December 31, 2017, and the carrying amount at December 31, 2016:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2017

 

December 31, 2016

 

 

    

Percentage

    

Fair Value

    

Carrying

    

Carrying

 

 

 

ownership

 

(Level 1)

 

amount

 

amount

 

 

 

dollar amounts in millions

 

Liberty SiriusXM Group

 

 

 

 

 

 

 

 

 

 

 

SIRIUS XM Canada

 

70%

 

$

NA

 

$

672

 

164

 

Total Liberty SiriusXM Group

 

 

 

 

 

 

 

672

 

164

 

 

 

 

 

 

 

 

 

 

 

 

 

Braves Group

 

 

 

 

 

 

 

 

 

 

 

Other

 

NA

 

 

NA

 

 

145

 

61

 

Total Braves Group

 

 

 

 

 

 

 

145

 

61

 

 

 

 

 

 

 

 

 

 

 

 

 

Formula One Group

 

 

 

 

 

 

 

 

 

 

 

Live Nation (a)

 

34%

 

$

2,965

 

 

756

 

731

 

Other

 

various

 

 

NA

 

 

177

 

161

 

Total Formula One Group 

 

 

 

 

 

 

 

933

 

892

 

Consolidated Liberty

 

 

 

 

 

 

$

1,750

 

1,117

 


(a)

See note 10 for details regarding the number and value of shares pledged as collateral pursuant to the Live Nation Margin Loan as of December 31, 2017.

The following table presents the Company’s share of earnings (losses) of affiliates:

 

 

 

 

 

 

 

 

 

 

 

Years ended December 31,

 

 

    

2017

    

2016

    

2015

 

 

 

amounts in millions

 

Liberty SiriusXM Group

 

 

 

 

 

 

 

 

SIRIUS XM Canada

 

$

29

 

13

 

(1)

 

Total Liberty SiriusXM Group

 

 

29

 

13

 

(1)

 

 

 

 

 

 

 

 

 

 

Braves Group

 

 

 

 

 

 

 

 

Other (a)

 

 

78

 

 9

 

 9

 

Total Braves Group

 

 

78

 

 9

 

 9

 

 

 

 

 

 

 

 

 

 

Formula One Group

 

 

 

 

 

 

 

 

Live Nation

 

 

(18)

 

(12)

 

(27)

 

Other

 

 

15

 

 4

 

(21)

 

Total Formula One Group

 

 

(3)

 

(8)

 

(48)

 

Consolidated Liberty

 

$

104

 

14

 

(40)

 


(a)

During the year ended December 31, 2017, an equity method affiliate of Braves Holdings sold a controlling interest in a subsidiary, resulting in Braves Holdings recording its portion of the gain of $69 million.

SIRIUS XM Canada

In the acquisition of SIRIUS XM on January 18, 2013, Liberty acquired an interest in Sirius XM Canada Holdings, Inc. (“SIRIUS XM Canada”) which SIRIUS XM accounts for as an equity method affiliate. Liberty recognized the investment at fair value, based on the market price per share (level 1), on the date of acquisition.

On May 25, 2017, SIRIUS XM completed a recapitalization of SIRIUS XM Canada, which is now a privately held corporation.

SIRIUS XM now holds a 70% equity interest and 33% voting interest in SIRIUS XM Canada, with the remainder of the voting power and equity interest held by two of SIRIUS XM Canada’s previous shareholders. The total consideration from SIRIUS XM to SIRIUS XM Canada, excluding transaction costs, during the year ended December 31, 2017 was $309 million, which included $130 million in cash and SIRIUS XM issued 35 million shares of its common stock with an aggregate value of $179 million to the holders of the shares of SIRIUS XM Canada acquired in the transaction. SIRIUS XM received common stock, non-voting common stock and preferred stock of SIRIUS XM Canada. SIRIUS XM owns approximately 591 million shares of preferred stock of SIRIUS XM Canada, which has a liquidation preference of one Canadian dollar per share. SIRIUS XM Canada is accounted for as an equity method investment as SIRIUS XM does not have the ability to direct the most significant activities that impact SIRIUS XM Canada’s economic performance.

SIRIUS XM also made a contribution in the form of a loan to SIRIUS XM Canada in the aggregate amount of $131 million on May 25, 2017. The loan is denominated in Canadian dollars and is considered a long-term investment with any unrealized gains or losses reported within Accumulated other comprehensive (loss) income. Such loan has a term of fifteen years, bears interest at a rate of 7.62% per annum and includes customary covenants and events of default, including an event of default relating to SIRIUS XM Canada’s failure to maintain specified leverage ratios. In addition, the terms of the loan require SIRIUS XM Canada to prepay a portion of the outstanding principal amount of the loan within sixty days of the end of each fiscal year in an amount equal to any cash on hand in excess of C$10 million at the last day of the financial year if all target dividends have been paid in full.

SIRIUS XM also entered into a Services Agreement and an Advisory Services Agreement with SIRIUS XM Canada. Each agreement has a thirty year term. Pursuant to the Services Agreement, SIRIUS XM Canada will pay SIRIUS XM 25% of its gross revenue on a monthly basis through December 31, 2021 and 30% of its gross revenue on a monthly basis thereafter. Pursuant to the Advisory Services Agreement, SIRIUS XM Canada will pay SIRIUS XM 5% of its gross revenue on a monthly basis. These agreements supersede and replace the existing agreements between SIRIUS XM Canada and its predecessors and SIRIUS XM.

Under the legacy agreement, as of December 31, 2016, SIRIUS XM’s related party current assets balance primarily consisted of activation fees and streaming and chipset costs for which it was reimbursed. SIRIUS XM has approximately $10 million and $6 million in related party current assets as of December 31, 2017 and 2016, respectively. As of December 31, 2017, the related party current asset balance included amounts due under the new services arrangements and certain amounts due related to transactions outside of the scope of the new services arrangements. At December 31, 2017 and 2016, SIRIUS XM has approximately $10 million and $11 million in related party liabilities, respectively, related to the legacy agreements with SIRIUS XM Canada which are recorded in current and noncurrent other liabilities in the Company’s consolidated balance sheets. SIRIUS XM recorded approximately $87 million, $46 million and $56 million in revenue for the years ended December 31, 2017,  2016 and 2015, respectively, associated with these various agreements in the Other revenue line in the consolidated statements of operations. SIRIUS XM Canada declared and paid dividends to SIRIUS XM of $4 million, $8 million and $16 million during the years ended December 31, 2017,  2016 and 2015, respectively. These dividends were first recorded as a reduction to SIRIUS XM’s investment balance in Sirius XM Canada to the extent a balance existed and then as Other income for the remaining portion.