Time Warner Credit Deal Spurs Biggest CME Rally on Record

Central European Media Ltd. rose the most on record in Prague after saying it reached a $545 million credit agreement with Time Warner Inc., its largest shareholder.

The stock surged 62 percent to 85 koruna, the biggest increase since the shares started trading in June 2005, at the close in Prague. The volume was almost nine times the three-month daily average. The benchmark PX index, in which the company has a 1.4 percent weighting, rose less than 0.1 percent, snapping a four-day losing streak.

CME, which broadcasts in the Czech Republic and five other eastern European countries, will use the funds to refinance its 11.625 percent senior notes due 2016 and for other corporate purposes, it said today in a regulatory statement. The company reported today its full-year loss narrowed to $281.5 million from $546.4 million a year earlier.

“The good news is the transaction will solve their short-term liquidity problem,” Komercni Banka AS analyst Josef Nemy said in an e-mail. The “CME will have a hard time paying off its big debts in 2017 and will have to refinance them again,” he said.

If concluded, the deal will allow CME to become free cash-flow positive from the beginning of 2015, it said.

The company’s fourth-quarter operating loss before depreciation and amortization shrank to $400,000 from $60.7 million in the year-earlier period, it said. Revenue fell 6 percent to $237.9 million.

“Our cash flows from operating activities will continue to be insufficient to cover operating expenses and interest payments,” the company said in the statement. “We will need other capital resources this year to fund our operations as well as our debt service and other obligations as they become due.”

CME is reviewing its smaller-sized assets such as radio stations and cinemas in Romania and other countries, co-Chief Executive Officer Michael Del Nin said in a conference call. The company expects business in its main market in the Czech Republic to grow this year, he said.

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