Central European Media Falls on Offering, Results: Prague Mover

Central European Media Enterprises Ltd. (CETV) shares fell the most in two months after the broadcaster said it will issue new shares to reduce debt and its first- quarter loss widened.

The stock declined 9.6 percent to 78 koruna by 1:02 p.m. in Prague, its steepest intraday decline since Feb. 27 and the worst performance today in the Czech Republic’s 14-member PX index.

“Some investors may be negatively surprised by the volume of the new offering, although some stock dilution was already priced in as it was expected,” Cyrrus AS analyst Tomas Mencik said by phone. Mencik has his hold recommendation under review. “There were also some not very good news on the Czech market.”

CME, as the company is known, also said today that it plans to raise as much as $174 million through a public offering of its Class A shares. CME said that Time Warner Inc affiliate Time Warner Media Holdings notified the company that it intends to exercise its rights to purchase 49.9 percent of the stock sold in the offering, Hamilton, Bermuda-based CME said today in a separate statement.

In addition, CME will sell $200 million in Class B shares in a private placement to Time Warner, it said. The company will use part of the proceeds for the repurchase or redeem a portion of CME senior notes and use the rest for operation growth, it said.

CME reported today a first-quarter net loss of $109 million, compared with $13.8 million a year earlier, the company said in a separate statement. Net revenues declined 18.2 percent to $137 million.

“2013 is a year of bold actions to restore the value we receive for our products,” Chief Executive Officer Adrian Sarbu said in an earnings statement. “We raised advertising prices and carriage fees and the first-quarter results reflect the initial phase of implementing these actions,” Sarbu said.

While the move was successful in most of CME’s countries, in the Czech Republic it hurt the broadcaster’s revenues and Oibda because of “resistance” from certain media agencies and advertisers, Sarbu said in the statement. CME will continue with its pricing policy across all countries as it is determined to reverse the trend of declining spending on TV advertisement, Sarbu said.

The company posted an operating loss before interest, depreciation and amortization of $20.7 million in the quarter it said today.

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

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

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