July 10, 2017 / 3:16 PM / 13 days ago

Time Warner's CME to stay in other markets after Croatia, Slovenia exit

3 Min Read

PRAGUE (Reuters) - Broadcaster Central European Media Enterprises (CME) (CETV.O) (CETV.PR) has no plans to exit other markets after striking a deal to sell television stations in Slovenia and Croatia, its co-chief executive told Reuters.

CME, whose main shareholder is U.S. media group Time Warner (TWX.N), said on Monday it agreed to sell its Croatian and Slovenian operations to United Group's Slovenia Broadband for 230 million euros ($262 million) to pay down debt, boosting shares to an eight-week high.

Co-CEO Michael Del Nin said in a telephone interview that the deal would speed up reducing CME's $1 billion debt, cut interest costs and improve profit margins.

"In the near term we don't have any plans to reduce or expand our geographic footprint," he told Reuters. "We need to get to a point where we are comfortable with the balance sheet. This transaction does a lot to get us there."

He did not exclude doing smaller deals on ancillary businesses in existing markets, but "there was nothing on the horizon".

CME had already secured a debt re-pricing deal in March to cut its weighted average borrowing cost by 150 basis points to 7.25 percent.

The sale of its Slovenian and Croatian assets will cut that average borrowing cost further, to an expected rate of 4.5 percent, CME said.

Most of CME's debt is in term loans guaranteed by Time Warner, which holds a 42.5 percent stake but has a 75 percent share on a fully diluted basis factoring in warrants it holds.

Del Nin said the sale deal, expected to be completed by the end of the year, would also help CME's free cash flow generation.

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 amortization (OIBDA), with their smaller scale limiting its margins.

Del Nin said CME's OIBDA margin overall was 23.5 percent in 2016, but reached 26 percent when excluding Croatia and Slovenia. "That helps understand the potential impact," he said.

He also said that while the sales brought forward the possibility of a dividend, CME had a way to go before considering payments and it was unlikely to pay one for this year or next.

"We have not guided 2018 results but I would be surprised (if) there is a dividend in (that) calendar year," Del Nin said.

Editing by Alexander Smith

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