UPDATE 1-Liberty Media uses cash to reduce debt load

NEW YORK, Nov 3 (Reuters) - Media mogul John Malone's Liberty Media Corp said on Monday it will use its large cash reserves to reduce its debt load and to lower the risk of triggering debt covenants due to turbulent financial markets.

Liberty said it will pay $197.3 million to terminate a swap agreement on exchangeable debentures due to a recent decline in Liberty's bond prices. The declines had caused two sets of swap arrangements to hit triggers that allowed the counterparties to terminate the swaps.

The company said it expects to enter into a new swap agreement related to these exchangeable debentures at a lower notional amount of $150 million.

"Given the turbulent markets, we are efficiently reducing financial risk and increasing transparency to give investors greater certainty," Greg Maffei, chief executive of Liberty, said in a statement.

Liberty said it would move $551 million of Viacom (VIAb.N) Exchangeable debt and $380 million of cash from the balance sheet of Liberty Entertainment (LMDIA.O) to Liberty Interactive (LINTA.O).

It said the change in attribution of the debt and cash is a necessary step in any potential split-off of Liberty Entertainment.

Liberty Interactive will be able to use around $300 million of the cash to purchase a portion of the outstanding principal amount of Liberty Media's senior debt through a tender offer. (Reporting by Yinka Adegoke, editing by Maureen Bavdek)