UPDATE 2-Liberty/Sirius talks do not involve takeover-source

(Adds companies declining comment, share price)

By Jui Chakravorty Das

NEW YORK, Feb 13 (Reuters) - Liberty Media Corp (LINTA.O) is in talks with Sirius XM Radio Inc (SIRI.O) to invest in the satellite radio company's capital structure, a source said on Friday, as Sirius tries to stave off a takeover bid by EchoStar Corp (SATS.O).

Liberty's talks with Sirius are friendly, do not involve a takeover of the company or a buyout of the equity, the source said.

Any possible agreement could include a loan to Sirius, or paying off its debt, or assuming the debt obligations.

Sirius XM's talks with Liberty are seen as a last-ditch attempt by Sirius chief Mel Karmazin to stave off the takeover bid by Charles Ergen's EchoStar, which holds $175 million in Sirius convertible bonds due on Feb. 17.

Another person familiar with the talks said both EchoStar and Liberty Media are continuing intense discussions with Sirius XM.

The talks with EchoStar are more of a hostile nature while Liberty's talks are cooperative with Sirius management, but the outcome remained uncertain, the sources said.

Liberty and EchoStar declined comment. Sirius did not return calls for comment.

Separately, Sirius on Friday said it had refinanced some of its debt that was due in December, but added that it still might have to file for Chapter 11 protection if talks toward refinancing other debt did not yield results by Tuesday.

"The company is in discussions with others with respect to transactions that could refinance some of its ... indebtedness," Sirius said in a statement.

"If these transactions are not consummated, it may be forced to file for bankruptcy as early as Feb. 17, 2009."

SIRIUS RISES

Shares of Sirius rose 2.6 cents, or about 35 percent, to 10 cents a share on the Nasdaq. The stock had risen as much as 40 percent earlier in the day.

The shares had lost nearly all their value since Sirius Satellite Radio completed its acquisition of XM Satellite Radio in July.

Sirius, which has a total debt load of about $3.25 billion, began planning to refinance its debt following its merger with rival satellite-radio operator XM, which was approved last July. But the credit markets froze shortly thereafter.

Ergen, who owns satellite companies EchoStar Corp and Dish Network Corp (DISH.O), began amassing Sirius debt several months ago and is hoping to take control of Sirius, one of the sources said.

Sirius, facing a slowdown in retail demand for its radios and the downturn in the automobile industry where it gains most of its new subscribers, has to consider all options in an effort to control costs.

Liberty Media is in the process of splitting off most of its Liberty Entertainment LMDIA.O unit, which owns the majority stake in U.S. satellite TV operator DirecTV Group Inc (DTV.O).

Some media reports had suggested DirecTV was in talks with Sirius, but a source said the discussions are with Liberty Media's management and not with that unit. (Additional reporting by Franklin Paul and Yinka Adegoke; Editing by Phil Berlowitz and Brian Moss)