« back
Moody's Upgrades CME's Corporate Family Rating to Ba3; Outlook Stable
June 27, 2006, Moody's Investors Service
Moody's Investors Service today upgraded the corporate family rating of Central European Media Enterprises Ltd ("CME" or the "company") to Ba3 from B1 reflecting the successful completion of its acquisition of TV Nova in 2005 combined with the continued satisfactory operational performance of the company's original stations over the past twelve months. Concurrently the ratings on the company's senior unsecured notes were also upgraded to Ba3 from B1. The outlook for all ratings is stable. CME's sound operational performance is principally due to the successful completion of the acquisition of TV Nova in the Czech Republic in May 2005. As expected, the company's Czech operations have dominated its operating results, with ca. 45% of consolidated EBITDA generated from this asset for the last twelve months ended March 2006. However, the performance of CME's original stations has also been satisfactory, with the strong performance of the Romanian operations principally offsetting disappointing results in Slovakia. As a result, the company's credit metrics are within the guidance indicated to Moody's at the time of the bond offering in May 2005 e.g. Debt to EBITDA for the financial year ended December 2005 was 5.6x, whilst RCF to Debt was 11.6% (please refer to Moody's Approach to Global Standard Adjustments in the Analysis of Non-Financial Corporations -- Part II for more information on Moody's ratio calculations).
The ratings upgrade also factors Moody's expectation that financial metrics will continue to improve in 2006, despite the implementation of a new sales policy and a restructuring programme at TV Nova, which is expected to result in a year-on-year decline in revenues and earnings for the Czech operations, and ongoing losses in its Croatian operations.
Further positive ratings progression would likely be driven by continued operating improvements which resulted in enhanced financial metrics (e.g. such that RCF to Debt approached the mid teens). However, Moody's cautions that the company's investment strategy and leverage tolerance is likely to constrain the rating at this juncture.
Conversely, there could be downward pressure on the ratings if the company's revised strategy for its Czech operations resulted in a sustained reduction in profitability at this division which was not offset by improvements at the company's other divisions or if management increased its leverage targets above the stated net debt to EBITDA ratio of less than 4.0x. In addition, since the notes allow for material amounts of secured debt to be raised, we caution that the current rating of the notes does not factor in any material use of the flexibility to incur this debt. In the event that the level of subsidiary debt rises, this could have a negative impact on the notching.
Ratings upgraded are as follows:
- Corporate family rating to Ba3 from B1
- Senior unsecured notes due 2012 upgraded to Ba3 from B1
Moody's previous rating action on CME was the upgrade to B1 from B2 on 12 April 2005 following robust operational and financial performance in 2004 and the expectation of the successful acquisition of TV Nova. Central European Media Enterprises Ltd., a Bermuda-based company with corporate offices in London, England is a TV broadcasting company with leading networks in six Central and Eastern European countries reaching an aggregate of approximately 82 million people. The Company's television stations are located in Croatia (Nova TV), Czech Republic (TV Nova, Galaxie Sport), Romania (PRO TV, Acasa, PRO Cinema), Slovakia (Markiza), Slovenia (POP TV, Kanal A) and Ukraine (Studio 1+1). For the last twelve months ended March 2006, CME generated revenues of US$472 million.
London
David G. Staples
Managing Director
Corporate Finance Group
Moody's Investors Service Ltd.
London
Nicole Guest
Asst Vice President - Analyst
Corporate Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
© Copyright 2006, Moody's Investors Service, Inc. and/or its licensors including Moody's Assurance Company, Inc.
(together, "MOODY'S"). All rights reserved.
- ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY COPYRIGHT LAW AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT. All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, such information is provided "as is" without warranty of any kind and MOODY'S, in particular, makes no representation or warranty, express or implied, as to the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of any such information. Under no circumstances shall MOODY'S have any liability to any person or entity for (a) any loss or damage in whole or in part caused by, resulting from, or relating to, any error (negligent or otherwise) or other circumstance or contingency within or outside the control of MOODY'S or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits), even if MOODY'S is advised in advance of the possibility of such damages, resulting from the use of or inability to use, any such information. The credit ratings and financial reporting analysis observations, if any, constituting part of the information contained herein are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER. Each rating or other opinion must be weighed solely as one factor in any investment decision made by or on behalf of any user of the information contained herein, and each such user must accordingly make its own study and evaluation of each security and of each issuer and guarantor of, and each provider of credit support for, each security that it may consider purchasing, holding or selling.
- MOODY'S hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MOODY'S have, prior to assignment of any rating, agreed to pay to MOODY'S for appraisal and rating services rendered by it fees ranging from $1,500 to $2,400,000. Moody's Corporation (MCO) and its whollyowned credit rating agency subsidiary, Moody's Investors Service (MIS), also maintain policies and procedures to address the independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually on Moody's website at www.moodys.com under the heading "Shareholder Relations - Corporate Governance - Director and Shareholder Affiliation Policy."
- Moody's Investors Service Pty Limited does not hold an Australian financial services licence under the Corporations Act. This credit rating opinion has been prepared without taking into account any of your objectives, financial situation or needs. You should, before acting on the opinion, consider the appropriateness of the opinion having regard to your own objectives, financial situation and needs.
For additional information, please contact:
Romana Tomasova
Director of Corporate Communications
Central European Media Enterprises
+44 (0)20 7430 5357
romana.tomasova@cme-net.com
