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Central European Media Jumps as Bond Buyback Eases Dilution

June 12 (Bloomberg) -- Central European Media Enterprises Ltd. snapped three days of losses after a reduced bond buyback cut the need for additional share sales that dilute the stock.

The broadcaster, known as CME, rallied 4.6 percent to 112.9 koruna at the close in Prague after earlier tumbling to the lowest since its Czech listing in 2005. The company’s U.S.- listed shares increased 7.1 percent to $5.41 by 10:37 a.m. in New York, the biggest jump in three weeks.

CME will repurchase 2014 bonds for $71.1 million, or 93.75 percent of nominal value to help lower indebtedness, the company said today on its website. It scrapped the buyback of its 2016 notes after holders demanded between 103 percent and 106 percent of face value in a tender ended yesterday, according to CME.

“Had they bought back more bonds, they’d have to finance this by issuing more shares in the market at a discount,” Josef Nemy, an analyst at Komercni Banka AS in Prague, said by phone today. “This amount is optimal. The market was afraid of major dilution, and now it turns out the risk is not as big.”

Erste Group Bank AG yesterday cut CME to hold from buy and lowered its 12-month price estimate to $6.10 from $15, saying the company will probably have to sell new shares for as much as $250 million to help repay its debt.

Time Warner Inc., CME’s biggest shareholder, will provide a $300 million loan and will increase its stake to 40 percent, CME said on April 30. Time Warner and RSL Capital LLC will pay $86.4 million for 11.5 million Class A shares, and CME will use proceeds from the sale to repay part of the new loan, the company said.

To contact the reporter on this story: Krystof Chamonikolas in Prague at kchamonikola@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

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