Central European Media Purchased Senior Notes to Cut Debt, Boost Liquidity

Central European Media Enterprises Ltd., the east European broadcaster partly owned by Time Warner Inc., repurchased senior notes worth $104 million to reduce its debt and improve liquidity.

“We don’t have any debt to repay until 2013 at the earliest and this greatly improves our maturity profile,” Chief Executive Officer Adrian Sarbu said in an interview. “We’re looking now at liquidity over $300 million at the year’s end, which we may use as we see fit -- either to buy debt or expand our business.”

The Hamilton, Bermuda-based broadcaster, also known as CME, said its CET 21 unit, which operates in the Czech Republic and Slovakia, issued $237 million of senior-secured notes on Oct. 14. CME then said on Oct. 27 it bought $46 million of its senior notes and plans to continue to buy back debt as opportunities arrive. The most recent purchase is in addition to the Oct. 27 action.

CME, which operates in six eastern European countries, has been battling a slower-than-expected pickup in advertising spending in its markets as the economies in the region move out of recession. The company, which returned to profitability in the second quarter of 2010, expects to post full-year net income, Sarbu said, speaking at its headquarters in Prague.

Buybacks, Rating

The buyback of $104 million in debt was conducted in October and November, according to the company. Moody’s assigned a Ba3 rating to the CET 21 bonds and at the same time affirmed CME’s B2 corporate family rating. Standard and Poor’s gave a rating of B to the CET 21 bonds, the same as the long-term credit rating for CME, the company has said.

CME rose 0.7 percent, or 2.5 koruna, on the Prague stock exchange as of 2:10 p.m., gaining for a third day, it’s longest consecutive rally since Oct. 13. The shares have lost 15 percent this year.

The company, established in 1993 by Ronald Lauder, an heir to the Estee Lauder Cos. cosmetics company, plans to cut its debt levels to four times Ebitda, or earnings before interest, tax and depreciation, in the next few years, Sarbu said. The current debt levels are about 10 times the measure, according to the executive.

‘Year of Recovery’

“We see the 2011 as the year of recovery of all our markets and also a year to implement our expansion,” the executive said. CME’s markets will recover at different speeds and a different starting times, Sarbu said, adding TV ad prices will return to 2008 levels in 2012 and 2013.

CME operates TV channels in the Czech Republic, Romania, Croatia, Slovakia, Slovenia and Bulgaria. After dropping unprofitable assets in Ukraine it agreed to buy a Bulgarian station in February. Time Warner owns 31 percent of the company after paying $241.5 million for the stake in 2009.

CME’s 2009 full-year loss shrank to $97.2 million from $269.5 million a year earlier. It said in October the company is “on track” to deliver full-year operating income before depreciation and amortization, or Oibda, between $100 to $115 million on revenue between $710 million and $725 million.

The broadcaster is expected to release its full-year results on Feb. 23.

CME is looking at “small-size profitable” acquisitions of distribution and production companies in eastern European countries in both its current and new markets, Sarbu said.

Sarbu, 55, founded Media Pro, a content production company, and worked as a state secretary for mass media in the Romanian government in 1990. He took over the helm of CME in 2009.

To contact the reporter on this story: Lenka Ponikelska in Prague lponikelska1@bloomberg.net.

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net

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