Don’t throw away those shares of Sirius XM Radio (SIRI) just yet. For shareholders, your paper might be worth something after all. Thanks to a last minute rescue by Liberty Media and its leader, John Malone.

The deal announced on Tuesday provides up to $530 million to Sirius Satellite that can be used to pay off existing debt. In return, Liberty Media will receive an ownership stake of 40%.

That dilution is substantial, but it sure beats the alternative. With the company facing a debt payment that it could not make, bankruptcy was looking like a near certainty.

Interestingly, due this week were maturing bonds held by EchoStar Corp. (SATS). This debt was to be the vehicle whereby EchoStar was hoping to steal this company from current shareholders.

In a bankruptcy, assets of the company are paid to the bondholders before equity shareholders. In that way, EchoStar was hoping to receive a significant equity stake in exchange for forgiving debt.

Now with the Liberty Media deal, EchoStar is paid off and Liberty Media obtains the ownership stake and in so doing preserving what is left of the current equity holder base.

As I said, the Liberty deal is a far cry better than the alternative.

With Liberty behind the company, SIRI now has much needed breathing room to continue building its business.

Now a monopoly, SIRI is in prime position to build a business that can deliver extraordinary cash flows. That is why Liberty jumped on board. The only negative is that shareholders are diluted.

The potential for bankruptcy was only a reflection on the global credit crisis that makes it nearly impossible to refinance any kind of debt no matter the potential of the underlying business.

For those that bought SIRI at much higher prices, recovery of your investment may now be possible. At this point there is no sense in selling. Stick around to see how this story plays out.

This article was written by Jamie Dlugosch, contributor to InvestorPlace Media. For more actionable insights likes this, visit www.InvestorPlace.com.