July 10, 2017 / 9:21 AM / 15 days ago

Broadcaster CME selling Croatian, Slovenian stations to cut debt

3 Min Read

PRAGUE (Reuters) - Broadcaster Central European Media Enterprises (CME) will sell its Croatian and Slovenian operations to United Group's Slovenia Broadband for 230 million euros ($262.18 million) to pay down debt, sending its shares higher.

The company, which owns television stations in six central and eastern European countries, wants to pay off some of its longstanding debt left over from various missteps before and after the global financial crisis nearly a decade ago.

CME, whose main shareholder is Time Warner, expects the sale to close by the end of the year and proceeds will go to repay a 250.8 million euro loan due in 2018, it said in a statement on Monday.

That repayment will lower CME's $1 billion debt load and cut its average borrowing cost by 275 basis points to 4.5 percent. Most of the debt is in term loans guaranteed by Time Warner.

"This transaction underscores the enduring attractiveness of broadcasters in the region. It also moves us significantly closer to our long-held goal of establishing a more appropriate leverage profile for our operations," CME co-Chief Executive Michael Del Nin said in the statement.

United Group, which is backed by U.S. investment firm KKR and the European Bank for Reconstruction and Development (EBRD), said in a separate statement it would invest further in CME's channels - Nova TV in Croatia and POP TV in Slovenia - once the deal is completed.

The group also owns Slovenia's second largest internet provider Telemach.

Croatia and Slovenia accounted for 18 percent of CME net revenue of $638.0 million in 2016 but only 9 percent of its total operating income before depreciation and amortisation (OIBDA).

In 2017, CME has forecast its core profit OIBDA to grow 13-17 percent at constant exchange rates after posting a 21 percent rise last year.

With earnings on the rise, it has been pushing to pay down its outstanding debt left over from various missteps before and after the global financial crisis nearly a decade ago.

Shares rose as much as 6 percent in Prague in opening trade and were up 4.8 percent at 97.85 crowns at 0821 GMT.

Analysts said the sale was positive for shares thanks to the reduction in debt that will lead to more cost savings.

CME said the loss of cash generated by the Croatian and Slovenian operations would be offset by estimated savings of $30 million from interest costs annually.

Reporting by Jason Hovet, editing by Louise Heavens

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