Central European Media ends Q1 with $1 billion debt; equity offering aimed at deleveraging

By Lisa Kerner

Charlotte, N.C., April 29 - Central European Media Enterprises ended the first-quarter of 2013 with net debt of about $1.1 billion and negative free cash flow of $11 million, according to chief financial officer David Sach.

"We ended the period with cash of $123 million," said Sach during the company's earnings conference call on Monday.

The company is continuing to take steps to conserve cash including restructuring its operating model and renegotiating foreign programming deals.

"We have no principal debt repayments until November of 2015 but must continue to deleverage the company," Sach said.

Also on Monday, Central European Media announced private and public equity offerings designed to strengthen the company's cash reserves and enable it to deleverage, further execute its pricing initiatives and invest more in local programming.

"We are looking to raise $400 million from the equity offerings announced this morning and expect to use $300 million of the proceeds to redeem or repurchase a portion of our 2016 notes. These notes carry a coupon of 11.625%, so annual interest costs should fall by $33 million," said Sach.

"Net debt should fall to approximately $700 million resulting in a leverage ratio of more than six times net debt-to-OIBDA, based on the midpoint of our full-year 2013 OIBDA guidance."

President and chief executive officer Adrian Sarbu said in order to restore value for its products, the company has raised advertising prices and carriage fees.

Financial highlights

Central European Media's net revenues for the quarter ended March 31 were $137 million compared to $167.4 million for the same period in 2012.

The company reported an operating loss for the quarter of $35 million compared to $10.3 million in 2012.

Net loss for the quarter ended March 31 was $109 million compared to $13.8 million for the same period in 2012.

OIBDA for the three months declined $34.7 million from the prior-year period to negative$20.7 million.

Central European Media is a telecommunications company domiciled in Hamilton, Bermuda.

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