Nov. 13 (Bloomberg) -- Premiere AG, Germany's biggest pay- television company, is still renegotiating debt terms after reporting a third-quarter loss on higher tax expenses and increased costs for hardware to stop illegal hacking.

Premiere said today it received a pre-emptive waiver of lending agreements that it was about to break and is negotiating with its bank syndicate to restructure debt. Net debt at the Unterfoehring, Germany-based company rose to 307 million euros ($384.3 million) from 175.5 million euros at the end of last year.

``The company failed to deliver a clear result from negotiations with banks on new financing terms after obviously breaching covenants,'' Maxim Tilev, an analyst at Commerzbank AG in Frankfurt, wrote in a report published today. ``Despite ongoing takeover speculation, we see the fundamental outlook as highly challenging.'' Commerzbank cut its recommendation on the stock to ``sell'' from ``reduce.''

Premiere has reported four consecutive quarterly losses as costs increased and sales were hurt by hackers gaining access to its broadcasts. A new encryption system that restricts its programs to paying subscribers increased hardware costs. Premiere today narrowed its forecast for a loss this year, and predicted sales of more than 1 billion euros.

Premiere shares slid as much as 58 cents, or 17 percent, to 2.90 euros in Frankfurt. The stock traded at 3.33 euros as of 1:35 p.m., valuing the company at 375.6 million euros. The stock has dropped 74 percent this year.

`No Certainty'

``There's no certainty that we will come to a successful conclusion of these talks,'' Chief Executive Officer Mark Williams said on a conference call today. ``They are constructive and they're progressing well.''

The costs of the waiver will be booked in this quarter, Williams said. The company predicted interest costs will rise.

Williams said the company will complete the previously announced ``strategic review'' of its businesses by the end of the year. There are no plans for a sale of Premiere Star, Williams said. The company also doesn't intend to raise its stake in the unit, which bundles and markets pay-TV channels. Williams said he doesn't see write-offs on intangible assets at this time.

Premiere offered to sell its majority stake in Premiere Star, newspaper Handelsblatt said this week, citing unidentified people involved in the process.

The net loss was 89.1 million euros, compared with net income of 100,000 euros a year earlier, the company said today. The loss was wider than the median estimate of six analysts surveyed by Bloomberg, who predicted a 51.9 million-euro loss. Sales slipped 1.2 percent to 244.6 million euros, also missing analysts' estimates.

Soccer Rights

The profit last year was helped by a tax gain. Third-quarter tax expenses were 33.1 million euros higher than a year earlier.

The company said acquiring the broadcast rights for the Bundesliga, Germany's top soccer league, remains an ``immediate priority.'' The DFL Soccer League invited 39 interested parties to submit bids for the rights by Nov. 21. Premiere now shows Bundesliga matches under a sublicense deal with cable operator Unity Media GmbH, which ends after the 2008-2009 season.

The company has been a Bundesliga partner for 17 years and wants ``to continue this partnership and to make a successful bid,'' Williams said.

New York-based News Corp., controlled by Rupert Murdoch, began acquiring Premiere shares in January and now owns 25 percent of the company. Investors have speculated that it may bid for the rest. Williams wouldn't comment on News Corp.'s intentions.

To contact the reporter on this story: Andreas Hippin in Frankfurt at ahippin@bloomberg.net.

Last Updated: November 13, 2008 07:45 EST