| Renee L. Wilm TEL +1 212 408.2503 FAX +1 212 259.2503 renee.wilm@bakerbotts.com |
April 3, 2009
Via EDGAR and By Hand
Securities and Exchange Commission
100 F Street NE, Mail Stop 3720
Washington, D.C. 20549
Attention: Paul Fischer, Attorney-Adviser
Liberty
Media Corporation
Form 10-K for the Fiscal Year ended December 31, 2007 (File No. 000-51990)
Liberty
Media Corporation
Form 8-K filed on February 18, 2009 (File No. 001-33982)
Dear Mr. Fischer:
Liberty Media Corporation ("Liberty Media") hereby electronically files under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), Amendment No. 1 to its preliminary Schedule 14A (the "Proxy Statement/Prospectus"), originally filed on January 22, 2009. Liberty Media intends to cause Liberty Entertainment, Inc. to file its Form S-4 Registration Statement (the "Form S-4"), of which the Proxy Statement/Prospectus will form a part, as soon as practicable following the availability of the exhibits thereto.
Set forth below are responses to the comments contained in your letter to Liberty Media, dated February 20, 2009 (the "SEC Letter"), regarding the preliminary Schedule 14A filed by Liberty Media on January 22, 2009, Liberty Media's Form 10-K ("Form 10-K") for the fiscal year ended December 31, 2007 (File No. 000-51990), and Liberty Media's Form 8-K ("Form 8-K") filed on February 18, 2009 (File No. 001-33982). For your convenience, each of our responses is preceded by the Staff's comment. The numbered paragraphs below correspond to the numbered paragraphs of the SEC Letter. All section references refer to the corresponding sections of the Proxy Statement/Prospectus unless otherwise noted. Defined terms used and not otherwise defined in this letter have the meanings ascribed to them in the Proxy Statement/Prospectus or Form 10-K, as applicable.
General
Response: Liberty Media filed its request for a private letter ruling from the IRS relating to the tax treatment of the split-off on January 16, 2009. The IRS is in the process of reviewing such request.
Response: The form of proxy card is being filed with the Proxy Statement/Prospectus.
Prospectus
Cover Page
To Our Stockholders
Response: We have revised the length of the prospectus cover page in response to the Staff's comment.
Response: We have revised the disclosure in response to the Staff's comment in appropriate places throughout the Proxy Statement/Prospectus.
Questions and Answers, page 1
What stockholder vote is required to approve the redemption proposal?, page 1
Response: We have revised the disclosure in response to the Staff's comment.
Summary, page 3
Treatment of Fractional Shares, page 5
Response: We have revised the disclosure in response to the Staff's comment.
Termination, page 6
Response: We have revised the disclosure to clarify that although the Board has no present plan or intention to terminate the split-off or the redesignation, the Board has determined to reserve this discretion in the event the occurrence of an unforeseeable event causes either or both of the transactions to no longer fulfill the purposes of their implementation.
Reasons for the Split-Off, page 7
Response: We have revised the disclosure in response to the Staff's comment.
Interests of Certain Persons, page 9
Response: We have revised the disclosure in response to the Staff's comment in appropriate places throughout the Proxy Statement/Prospectus.
Risk Factors, page 12
Response: We have revised the disclosure in response to the Staff's comment in appropriate places throughout the "Risk Factors" section of the Proxy Statement/Prospectus.
Risk Factors Relating to the Split-Off, page 12
LEI may have a significant indemnity obligation to Liberty Media if the split-off, the News Exchange or certain restructuring transactions related to the News Exchange are treated as taxable transactions., page 13
Response: An estimate of the possible extent of the indemnity obligations is not determinable. We have, however, revised the disclosure in response to the Staff's comment to clarify that the indemnification obligations that LEI has undertaken are not limited in amount, nor subject to any cap.
Risk Factors Relating to LEI, page 14
Response: We have revised the disclosure to add an additional risk factor relating to LEI's history of operating losses under the sub-heading "—Factors Relating to LEI" in response to the Staff's comment.
LEI could be unable in the future to obtain cash in amounts sufficient to service its debt., page 15
including, as applicable, any acceleration of the $2 billion debt principal incurred in connection with the DIRECTV acquisition.
Response: We have revised the disclosure in response to the Staff's comment.
LEI and certain of its subsidiaries, including DIRECTV, are subject to additional FCC conditions., page 16
Response: We have revised the disclosure in response to the Staff's comment.
If, following the split-off, LEI is unable to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 . . ., page 17
Response: We have revised the disclosure in this risk factor and the MD&A in Annex C in response to the Staff's comment.
LEI has overlapping directors and management with Liberty Media and Liberty Global Inc., which may lead to conflicting interests., page 17
LEI may compete with Liberty Media and LGI for business opportunities., page 18
Response: We have revised the disclosure in response to the Staff's comment.
The Special Meeting, page 31
Solicitation of Proxies, page 33
Response: Liberty Media confirms that all written soliciting materials, including any scripts used in soliciting proxies over the telephone, will be filed under the cover of Schedule 14A in accordance with Rule 14a-6(b) and (c).
The Split-Off, page 34
Background and Reasons for the Redemption Proposal, page 34
Response: We have revised the disclosure in response to the Staff's comment.
costs associated with operating as a separate public company, as well as the potential tax liability to Liberty Media, LEI, and their respective stockholders.
Response: We have revised the disclosure in response to the Staff's comment.
Response: We have revised the disclosure in response to the Staff's comment.
Response: We have revised the disclosure in response to the Staff's comment.
Accounting Treatment, page 54
Response: We refer the Staff to the section "Proposals of the Liberty Media Board—Part I: The Split-Off Proposals—Background and Reasons for the Split-Off Proposals" for a discussion of the background and reasons for the split-off proposals. Supplementally, we advise the Staff that when the News Exchange was completed and the Liberty Entertainment tracking stock was created in March 2008 Liberty Media's initial strategy was to attempt to drive synergies between the large distribution platform operated by DIRECTV and Liberty Media's programming businesses such as Starz Entertainment, QVC, GSN and the Regional Sports Networks. In fact Liberty Media was actively considering investments in other programming networks in early 2008 as an extension of this overall strategy. Liberty Media also believed that ownership of a controlling interest (and possibly 100%) of DIRECTV was necessary in order to most effectively create these synergistic opportunities between DIRECTV and its other businesses. Towards this end, in April 2008 Liberty Media increased its ownership in DIRECTV to approximately 48% which was close to the maximum ownership Liberty Media could have without having to make a tender offer to buy the remainder of DIRECTV. Liberty Media also entered into a standstill agreement with respect to its voting above the approximately 48% level so that DIRECTV could pursue its stock repurchase strategy without inadvertently giving Liberty Media voting control over DIRECTV.
As previously mentioned, provisions in the DIRECTV governance arrangements require Liberty Media to make a tender offer for the entire company if Liberty Media obtains more than a 50% interest. Liberty Media notes that the public float of DIRECTV was and continues to be substantial and any offer by Liberty Media to purchase this remaining interest would require significant amounts
of debt and equity capital. Liberty Media actively considered several different scenarios that potentially would allow it to make a full tender offer for DIRECTV but given the tightening of credit markets and the large trading discount of the Liberty Entertainment tracking stock to DIRECTV's stock price it became apparent that none of these options was feasible. It was not until the acknowledgement that it would be extremely difficult for Liberty Media to pursue a complete roll-up of DIRECTV that Liberty Media's board began seriously considering the possibility of a split-off of the Liberty Entertainment tracking stock. Accordingly, Liberty Media does not believe that the Liberty Entertainment tracking stock was created in contemplation of the split-off and therefore carryover basis accounting is appropriate.
Material U.S. Federal Income Tax Consequences, page 56
Alternatively, advise us whether you intend to obtain and file a long-form tax opinion.
Response: A form of the counsel's short-form opinion is being provided supplementally pursuant to comment 31 below. Additionally, we have revised the disclosure in response to the Staff's comment.
Response: We have revised the disclosure in response to the Staff's comment.
Annex C—Liberty Entertainment, Inc., LMC Entertainment and Liberty Media Corporation Financial Statements, page C-1
Management's Discussion and Analysis, Liberty Entertainment, page C-3
Please consider expanding your discussion of any known trends or uncertainties that could materially affect LEI's results of operations in the future, including any trends management considers meaningful for investors in understanding LEI's prospects after the split-off. For example, address what changes you expect as a result of becoming a public company. Likewise, please address the effects of consolidation within the cable industry. We note risk factor disclosure in this regard on pages 17 and 15, respectively.
Response: We have revised the disclosure in response to the Staff's comment in this section and in the "Risk Factors" section.
Liquidity and Capital Resources, page C-8
Response: We have revised the disclosure in response to the Staff's comment.
Response: We have revised the disclosure in response to the Staff's comment.
LMC Entertainment Financial Statements
Note 6—Investment in The DIRECTV Group Inc. page C-25
Response: We have revised the disclosure in response to the Staff's comment. Details about the terms of the standstill agreement are included under the heading "Certain Relationships and Related Transactions—Relationships between DIRECTV and Liberty Media—Arrangements Relating to the DIRECTV Ownership Interests" in the Proxy Statement/Prospectus.
Note 10—Financial Instrument and Long Term Debt, page C-28
Response: We have revised the disclosure in response to the Staff's comment.
Annex D—The
DIRECTV Group
Financial Statements for the nine months ended September 30, 2008
Note 4 Borrowings, page D-28
2008 Financing transactions
Response: The DIRECTV Group has authorized us to provide you with the following response:
DIRECTV US is comprised of DIRECTV Holdings LLC (DIRECTV Holdings), which consists of its 100% owned subsidiary DIRECTV Enterprises, LLC and its 100% owned subsidiaries and DIRECTV Financing Co., Inc. (DIRECTV Financing). DIRECTV Holdings is a 100% owned subsidiary of The DIRECTV Group. DIRECTV Holdings and DIRECTV Financing are co-registrants that file periodic reports with the SEC on Form 10-K and Form 10-Q under commission file number 333-106529. DIRECTV Holdings and DIRECTV Financing (the Co-Issuers) issued the 7.625% senior notes in May 2008 and previously issued 8.375% senior notes due in 2013 and 6.375% senior notes due in 2015. All of these senior notes have been registered under the Securities Act of 1933, as amended, and have been fully and unconditionally guaranteed, jointly and severally, by all of DIRECTV Holdings' 100% owned subsidiaries, other than DIRECTV Financing, but not by The DIRECTV Group or any of its other subsidiaries, including DIRECTV Latin America. The Co-Issuers, who have issued, registered and guaranteed these securities, include condensed consolidating information in the notes to the financial statements in their periodic filings.
Rule 3-10 of Regulation S-X states that "Every issuer of a registered security that is guaranteed and every guarantor of a registered security must file the financial statements required for a registrant by Regulation S-X". In response to the Staff's comment, The DIRECTV Group understands Rule 3-10 of Regulation S-X to require inclusion of condensed consolidating information in a footnote to the financial statements only if The DIRECTV Group were to have issued and/or guaranteed registered securities. Because The DIRECTV Group, which is the reporting entity in this case, did not issue or register such securities and does not guarantee the debt of DIRECTV Holdings and DIRECTV Financing, The DIRECTV Group does not include condensed consolidating information for DIRECTV Holdings and DIRECTV Financing in The DIRECTV Group's footnotes to its financial statements.
Exhibits/Annexes
Response: At the Staff's request, we are providing drafts of the tax and legal opinions supplementally, as follows: (i) the opinion of Skadden, Arps, Slate, Meagher & Flom LLP relating to certain tax matters is included as Annex 1 to this letter, (ii) the opinion of Baker Botts L.L.P. relating to certain tax matters is included as Annex 2 to this letter, and (iii) the legal opinion of Baker Botts L.L.P. relating to the securities to be issued in the distribution contemplated by the Proxy Statement/Prospectus is included as Annex 3 to this letter.
Schedule 14A for 2008 Annual Shareholders' Meeting
Performance-Based Bonus Program, page 28
Response: We have responded to the Staff's comment in "Executive Compensation—Compensation Discussion and Analysis," which is included in the Proxy Statement/Prospectus.
Response: The Staff is advised that Liberty Media's investment in Sirius will not be included in the assets and businesses of LEI, but rather will remain with Liberty Media following the split-off. This investment has been attributed to Liberty Media's Capital Group. Therefore Rule 3-05 financial statements are not required to be filed with the Proxy Statement/Prospectus. Liberty Media is assessing the significance of this investment to Liberty Media and will file any necessary financial statements on Form 8-K.
* * *
If you have any questions with respect to the foregoing responses to the SEC Letter or require further information, please contact the undersigned at (212) 408-2503.
| Very truly yours, | ||
| /s/ RENEE L. WILM | ||
| Renee L. Wilm |
Liberty Media Corporation
Charles Y. Tanabe
KPMG LLP
Arnold Hoy
Skadden, Arps, Slate, Meagher & Flom LLP
Mathew A. Rosen
FORM OF OPINION OF SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
[ ], 2009
Liberty
Media Corporation
12300 Liberty Boulevard
Englewood, Colorado 80112
Ladies and Gentlemen:
We have acted as special tax counsel to Liberty Media Corporation ("Liberty Media") in connection with the split-off of Liberty Entertainment, Inc. ("LEI"). In rendering our opinion set forth herein, we have examined and relied upon, without independent investigation or verification, the facts, information, statements, covenants, representations and warranties contained in the originals or copies, certified or otherwise identified to our satisfaction, of (i) the proxy statement on Schedule 14A of Liberty Media (the "Proxy Statement"), filed with the Securities and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended (the "Securities Act"), including all exhibits and enclosures thereto, (ii) the officer's certificate from Liberty Media, dated [ ], including all exhibits thereto, (iii) letters from certain shareholders of Liberty Media, dated [ ], regarding the split-off, (iv) such other documents and records as we deem necessary or appropriate as a basis for this opinion, and (v) certain other statements made by Liberty Media and LEI. We have also examined and relied upon, without independent investigation or verification, the initial and continuing accuracy and completeness of the facts, information, statements, covenants, representations and warranties contained in the originals or copies, certified or otherwise identified to our satisfaction, of (i) the request by Liberty Media for rulings regarding the split-off from the Internal Revenue Service (the "IRS"), as subsequently supplemented from time to time, including all exhibits and enclosures thereto (the "Ruling Request"), and (ii) the private letter ruling issued by the IRS to Liberty Media regarding the split-off (the "Ruling").
Our opinion assumes and is conditioned on, among other things, the initial and continuing effectiveness and validity of the Ruling and the initial and continuing accuracy and completeness (which we have neither investigated nor verified) of the facts, information, statements, covenants, representations, warranties and agreements set forth in the documents referred to above. In our examination, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified, photostatic, electronic or facsimile copies and the authenticity of the originals of such documents. We also have assumed that the split-off will be consummated in the manner contemplated by the Ruling and as described in the Proxy Statement and the Ruling Request, and that none of the terms and conditions contained therein will have been waived or modified in any respect.
In rendering our opinion, we have considered the applicable provisions of the Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations promulgated thereunder (the "Regulations"), published rulings and procedures of the IRS, published judicial decisions, and such other authorities as we have considered relevant, in each case, as in effect on the date hereof. It should be noted that the Code, the Regulations, judicial decisions, administrative interpretations and such other authorities are subject to change at any time and, in some circumstances, with retroactive effect. No assurances can be given that the IRS will not assert a position contrary to one or more of the conclusions set forth in our opinion or that a court will not agree with the IRS's position. A change in any of the authorities upon which our opinion is based could affect one or more of our conclusions as stated herein. We undertake no responsibility to advise you of any future change in the matters stated herein or in the federal income tax laws or the application or interpretation thereof.
1
Based solely upon and subject to the foregoing and the qualifications set forth in the Proxy Statement, under current United States federal income tax law:
The discussion contained in the Proxy Statement under the caption "MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE SPLIT-OFF," insofar as it summarizes United States federal income tax law, is our opinion.
Except as expressly set forth above, we express no other opinion regarding the tax consequences of the split-off. This opinion has been prepared for you in connection with the split-off and the Proxy Statement and may not be relied upon by anyone else without our prior written consent. In accordance with the requirements of Item 601(b)(23) of Regulation S-K under the Securities Act, we hereby consent to the use of our name under the captions "MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE SPLIT-OFF" and "LEGAL MATTERS" in the Proxy Statement. In giving this consent, we do not admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the SEC thereunder.
The opinion expressed herein is as of the date hereof, and we disclaim any undertaking to advise you of changes of facts stated or assumed herein or any subsequent changes in applicable law.
| Very truly yours, |
2
[BAKER BOTTS L.L.P. LETTERHEAD]
, 2009
Liberty
Media Corporation
12300 Liberty Boulevard
Englewood, CO 80112
Ladies and Gentlemen:
As counsel for Liberty Media Corporation, a Delaware corporation ("Liberty"), we have examined and are familiar with Amendment No. [ ] to Liberty's Schedule 14A (the "Proxy Statement"), which was filed by Liberty on , 2009 with the Securities and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended (the "Securities Act"). The Proxy Statement describes, among other transactions, the reverse split (the "Reverse Split"), whereby:
Cash would be issued in lieu of fractional shares of any series of Liberty Capital Common Stock or Liberty Interactive Common Stock.
We have participated in the preparation of the discussion set forth in the Proxy Statement under the heading "Material U.S. Federal Income Tax Consequences of the Reverse Split" (the "Discussion"). Unless otherwise specified, capitalized terms shall have the meaning assigned to such terms in the Proxy Statement. References herein to the "Code" shall refer to the Internal Revenue Code of 1986, as amended (the "Code").
In providing this opinion, we have examined and are relying upon the truth and accuracy at all relevant times of the statements, representations, covenants, and assumptions contained in (i) the representation letter dated as of the date hereof that was provided to us by Liberty, (ii) the Proxy Statement, (iii) the Restated Certificate of Incorporation of Liberty that is in effect as of the date hereof, (iv) the form of the Restated Certificate of Incorporation of Liberty attached as an annex to the Proxy Statement, that will be in effect if the redesignation (as described in the Proxy Statement) is completed prior to the effective time of the Reverse Split, (v) the form of the Certificate of Amendment of Restated Certificate of Incorporation of Liberty attached as an annex to the Proxy Statement, which will be in effect at the time of the Reverse Split, and (vi) information provided to us by Liberty. We have not undertaken any independent investigation of any factual matter set forth in any of the foregoing. In addition, we have assumed that all such statements, representations, and assumptions are true and accurate without regard to any qualifications such as "believes," "expects," "to the best knowledge of," and the like. Any inaccuracy in any of the aforementioned statements, representations, and assumptions or breach of any of the aforementioned covenants could adversely affect our opinion.
Subject to the foregoing and subject to the conditions, limitations, and qualifications described herein and in the Discussion, the Discussion is our opinion, insofar as it relates to matters of U.S. federal income tax law and legal conclusions with respect to those matters, with respect to the material U.S. federal income tax consequences to holders of Liberty Capital Common Stock and Liberty Interactive Common Stock of the Reverse Split.
Our opinion is based on our interpretation of the Code, its legislative history, applicable Treasury regulations, judicial authority, and administrative rulings and practice, all as of the date hereof. There can be no assurance that future legislative, judicial or administrative changes or interpretations will not adversely affect the accuracy of the conclusions set forth herein. We do not undertake to advise you as to any such future changes or interpretations unless we are specifically retained to do so. Our opinion is not binding upon the Internal Revenue Service (the "IRS") or a court and will not preclude the IRS or a court from adopting a contrary position. We express no other opinion as to the U.S. federal, and express no opinion as to the state, local, foreign, or other tax consequences, of the Reverse Split.
This opinion is delivered to you solely in connection with and for purposes of the Reverse Split contemplated by the Proxy Statement and is not to be relied upon by any other person, quoted in whole or in part, or otherwise referred to (except in a list of closing documents), nor is it to be provided to any other person without our prior written consent. Notwithstanding the foregoing sentence, we consent to the filing of this letter with the SEC as an exhibit to the Registration Statement and to the references to our firm name in the Proxy Statement. In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under the Securities Act or the rules of the SEC thereunder.
| Sincerely, | ||
| BAKER BOTTS L.L.P. |
[BAKER BOTTS L.L.P. LETTERHEAD]
, 2009
Liberty
Entertainment, Inc.
12300 Liberty Boulevard
Englewood, CO 80112
Ladies and Gentlemen:
As counsel for Liberty Entertainment, Inc., a Delaware corporation, (the "Company"), we have examined and are familiar with the Registration Statement on Form S-4 (the "Registration Statement"), filed by the Company on the date hereof with the Securities and Exchange Commission for the purpose of registering under the Securities Act of 1933, as amended (the "Securities Act"), [ ] shares (the "Series A Shares") of the Company's Series A common stock, par value $.01 per share (the "Series A Common Stock"), and [ ] shares (the "Series B Shares" and together with the Series A Shares, the "Shares") of the Company's Series B common stock, par value $.01 per share (the "Series B Common Stock" and together with the Series A Common Stock, the "Common Stock"), to be issued by the Company in connection with the redemption by Liberty Media Corporation ("Liberty Media") of a portion of the outstanding shares of Series A Liberty Entertainment common stock ("LMDIA") and Series B Liberty Entertainment common stock ("LMDIB") for all of the outstanding Shares, which will result in the separation of the Company (the "Split-Off") from Liberty Media. The Company has entered into a Reorganization Agreement, dated as of [ ], 2009 (the "Reorganization Agreement"), with Liberty Media, which provides for, among other things, the Split-Off.
Subject to the satisfaction or, if applicable, waiver of the conditions to the Split-Off, Liberty Media will redeem, on a pro rata basis and on the date designated by Liberty Media's board of directors (the "Redemption Date"), (i) 0.9 of each outstanding share of LMDIA for 0.9 of a Series A Share, with 0.1 of each share of LMDIA remaining outstanding as Liberty Entertainment common stock, and (ii) 0.9 of each outstanding share of LMDIB for 0.9 of a Series B Share, with 0.1 of each share of LMDIB remaining outstanding as Liberty Entertainment common stock, subject in each case, to the payment of cash in lieu of any fractional shares.
In connection with the Split-Off, the Company will file a certificate of incorporation (the "Charter"), which will set forth the terms of the Common Stock. The terms and conditions of the transactions contemplated by the Split-Off, including the Redemption, and the Common Stock, are described in the proxy statement/prospectus which forms a part of the Registration Statement to which this opinion is an exhibit.
In connection with rendering our opinion, we have examined, among other things, originals, certified copies or copies otherwise identified to us as being copies of originals, of (i) the form of the Company's Charter to be in effect on the Redemption Date; (ii) the form of the Bylaws of the Company to be in effect on the Redemption Date; (iii) the form of stock certificates representing the Series A Common Stock and the Series B Common Stock included as Exhibits 4.1 and 4.2 to the Registration Statement, respectively; (iv) records of proceedings of the boards of directors of the Company and Liberty Media; and (v) such other documents, records and certificates of public officials as we deemed necessary or appropriate for the purpose of rendering this opinion. In rendering this opinion, we have relied, to the extent we deem such reliance appropriate, on certificates of officers of the Company and Liberty Media as to factual matters regarding the Company and Liberty Media that were not readily ascertainable by us. We have assumed the authenticity of all documents submitted to us as originals and the conformity to authentic original documents of all documents submitted to us as copies.
On the basis of such examination and review, we advise you that, in our opinion, upon the issuance and delivery of the Shares in accordance with the terms of the Split-Off, the Shares will be duly authorized, fully paid, validly issued and non-assessable.
This opinion is limited to the corporate laws of the state of Delaware, and the laws of the United States of America. We hereby consent to the filing of this opinion as Exhibit 5.1 to the Registration Statement and to the reference to us under the heading "Additional Information—Legal Matters" in the Registration Statement. In giving the foregoing consent, we do not admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Securities and Exchange Commission promulgated thereunder.
| Sincerely, | ||
| BAKER BOTTS L.L.P. |