Central European Media Enterprises Ltd. (CETV), the TV broadcaster, is receiving $386.4 million in financing from Time Warner Inc. (TWC) and billionaire Ronald Lauder to pay debts coming due starting in 2013.
Time Warner will provide a $300 million loan, Central European Media, known as CME, said yesterday in a statement. The New York-based media company and Lauder’s RSL Capital LLC will pay $86.4 million for 11.5 million Class A shares. Time Warner’s stake will rise to 40 percent.
CME, a Bermuda-registered operator of television channels in central and eastern Europe, has been battling a slower-than- expected pickup in advertising sales as regional economies emerge from recession. CME had its shares cut to hold from buy last month at Deutsche Bank AG, which said that a stagnant advertising market will hurt cash flow and may force it to issue new shares at a discount to the market price.
Time Warner and Lauder will pay $7.51 a share, according to the statement. That’s 5.1 percent below yesterday’s close of $7.91 in New York trading. The stock, which lost 1.1 percent yesterday, has gained 21 percent this year.
Proceeds from the credit facility will be used to retire existing obligations. CME intends to use money from the equity sale to repay the new Time Warner loan. If the new debt is outstanding for 180 days, Time Warner can increase its stake in CME to 49.9 percent, according to the statement. RSL is buying 2 million shares.
Time Warner purchased a 31 percent stake in CME for $241.5 million in May 2009 with the agreement that Lauder, CME’s founder and non-executive chairman, will control Time Warner’s voting rights in the company for at least four years. Time Warner increased its stake to 34.4 percent in March 2011.
CME will purchase an aggregate of $300 million of 3.5 percent senior convertible notes due in 2013, senior floating rate notes due 2014 and 11.625 percent senior notes due 2016, the company said.
As part of the arrangement, Time Warner and Lauder will convert Class B shares into Class A, the company said. The accord is subject to a vote of CME’s shareholders, and Lauder committed to voting stock he controls in favor of this transaction, according to the statement.
(CME executives plan to discuss the transaction and first quarter earnings on May 2 at 9 a.m. New York time. To listen, dial +1-785-424-1055 with passcode CETVQ112.)
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