Premiere sets rights issue and restructures debt

FRANKFURT (Reuters) - Pay-TV broadcaster Premiere PREGn.DE has struck a deal to refinance its debt and raise 450 million euros ($630 million) in fresh capital that major shareholder News Corp NWSa.N will back, subject to conditions.

Premiere shares lost as much as 7 percent on Tuesday on concerns about the conditions attached -- which include News Corp's securing an exemption from German authorities from having to make a full takeover offer -- and a bleak business outlook.

"The successful implementation of the financing plan is prerequisite for the survival of Premiere," Chief Executive Mark Williams said.

Premiere said existing debt agreements would be replaced by new long-term facilities of 525 million euros, conditional on two rights issues for a combined 450 million euros to be guaranteed by News Corp, which owns 25 percent of Premiere.

The first tranche would offer up to 10.2 million shares at a minimum price of 3.19 euros each, a sharp discount to Monday's close at 4.26 euros.

Premiere said it expects a negative cash flow for 2009 in a range of 250 million euros to 275 million euros as well as a significant EBITDA (earnings before interest, tax, depreciation and amortization) loss, while it aims to break even by the end of 2010 before making profits in 2011 and beyond.

News Corp said it would buy any unsubscribed shares to ensure gross proceeds to Premiere of at least 25 million euros in the first capital increase, provided this did not lift its stake beyond 29.9 percent.

Under German law, acquiring a 30 percent stake in a company triggers a mandatory takeover offer for the rest. Regulator BaFin, which had no immediate comment on Tuesday, may waive the regulation if the takeover target is a restructuring case.

Premiere shares were down 5.6 percent to 4.02 euros by 5:01 a.m. EST, leading the decliners in Germany's mid-cap index .MDAXI.

James Murdoch, head of News Corp Europe, said News Corp's support would allow Premiere to improve its competitiveness.

"A true renewal of Premiere will raise standards in the entire market. All shareholders will benefit from that."

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Some analysts welcomed the news, others were cautious.

"Now the financing is secured and takes away the insolvency risk," Harald Heider at DZ Bank said in a note and called the plans "reasonable."

Iris Schaefer, analyst at Landesbank Baden-Wuerttemberg, pointed out the company had not been able to turn the business around even in a positive market environment.

"From our point of view, the company has to prove whether the new business plan can improve operating performance in the current economic environment."

A Frankfurt-based trader said: "The low subscription prices of the capital increases -- that are subject to certain conditions -- and Premiere's bleak 2009 and 2010 outlook are dragging down the shares."

Premiere, Germany's only pay-TV satellite broadcaster, is being run by Williams, a News Corp executive with a track record of turning around pay-TV businesses.

He has scored one victory so far. In November, German soccer league DFL awarded Premiere pay-TV and Web rights to show live Bundesliga soccer matches for the next four seasons.

Premier-league soccer is the broadcaster's main draw although Premiere shows movies, documentaries, popular drama series such as "Lost" and pornography.

Premiere failed to secure the rights at the last auction in 2005, but in August 2007 won approval from regulators for an accord with cable operator UnityMedia that gave Premiere access to the sought-after rights to show Germany's most popular sport.

Premiere's net debt had risen to 307 million euros by the end of the third quarter from 175.5 million euros at the end of 2007. It expected net debt of around 320 million euros at year's end.

With the proceeds of the capital increase, Premiere is planning to make investments in programing, technology and marketing aiming to attract new subscribers to its services.

Lazard advised Premiere on the transaction.

(Reporting by Christoph Steitz and Nicola Leske; Editing by Sharon Lindores)