Central European Media Enterprises Ltd, Winner, Best Corporate Debt Solution

Published: Aug 2011

Central European Media Enterprises Ltd was ten times leveraged and had $440m of debt due in March 2013. Although recovering, this debt maturity was most unlikely to be repaid in cash so it required refinancing at minimum cost.


Photo of Richard Parkinson and Mark Wyllie, VP Corporate Finance.

Treasury Team

Central European Media Enterprises (CME) is a vertically integrated media company comprised of three divisions. The broadcasting division holds 24 television stations in its portfolio across six markets and maintains market and audience leadership in all of them. Media Pro Entertainment is CME’s content and distribution division and owner of one of the largest studio facilities in Central and Eastern Europe. Its New Media division has over 60 online products and services and attracts 11 million average monthly unique users.

Using a 3(a)(9) private exchange of debt leveraged CME’s in-depth understanding of its debt investor base, and avoided the arbitrage and market making often seen in bank based relationships. Refinancing only half the outstanding debt to November 2015 spread CME’s maturity profile perfectly, reducing risk. By exchanging 1:1 old for new notes, plus cash for the value difference, the media company avoided arbitrage between new issue and old and could focus on the value difference.

As Mark Wyllie points out, “We extended the maturity profile by privately exchanging $206m of 2013 debt into November 2015 debt. We contacted our investors directly, so the real point I wish to make is that no banks were used to book-build. Investors received immediately registered debt (under 3(a) (9) rules) and the transaction avoided publicity and potential arbitrage opportunities around the issue of new convertible notes.”

Central European Media Enterprises Ltd saved over $5m in fees by not using an investment bank to price a new convertible debt issue. It also used its very strong debt investor relationships to build its own book of interest and started, priced and closed the whole deal in ten business days. This is a truly outstanding achievement. Mark Wyllie further comments, “this is a very interesting transaction, swapping debt for debt in the convertible market without a bank to intermediate with investors. By cutting out the ‘middle man’ we found out exactly what investors wanted. Two banks we talked to had told us this deal was impossible before we launched.”

“Receiving the Adam Smith Award is a fantastic acknowledgement of the creativity and skills of  the Treasury and Investor Relations teams at Central European Media Enterprises Ltd.”

The company completed the privately negotiated exchange of a $206,252,000 aggregate principal amount of its 3.50% senior convertible notes due 2013 (‘2013 notes’) for a $206,252,000 aggregate principal amount of 5.0% senior convertible notes due 2015 (the ‘new notes’) and cash consideration as well as accrued interest on the 2013 notes of approximately $30.2m.

The new notes will bear interest at 5.0% per annum and will mature on 15th November, 2015. They will be convertible into shares of Class A common stock upon the occurrence of certain specified events based on an initial conversion rate of 20 shares of CME’s Class A common stock per $1,000 principal amount of notes (which is equivalent to an initial conversion price of $50 per share of CME’s Class A common stock). The new notes will be jointly and severally guaranteed on a senior basis by two of CME’s wholly-owned subsidiaries and will be secured by a security interest in shares of these two subsidiary guarantors.

The geographical spread of the transaction is extensive, including pan-Europe and North America and the benefits of this transaction can be summarised as follows:

  • Improvement to the company’s credit rating.
  • Interest savings.
  • Pricing enhancements.
  • Risks removed/mitigated.
  • Extension of maturity profile in a 10x leveraged company.

Adrian Sarbu, President and Chief Executive Officer, commented “We are pleased to announce the success of this private refinancing, demonstrating the strong support for CME among the debt investor community. This is an efficient transaction, extending our maturity profile. It allows us to maintain our cash interest cost at similar levels to 2010.”

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