Analyst Upgrades Central European Media Stock After Time Warner Loan

Jefferies' Will Smith says the funding will "significantly reduce" debt concerns surrounding the Eastern European broadcaster.


LONDON - Jefferies analyst Will Smith on Tuesday upgraded his rating on Eastern European broadcaster Central European Media to "buy" following an overnight funding agreement with investor Time Warner.

Smith boosted his price target on the stock by $2 to $12 in a note entitled "TW Steps In."

The company's major shareholders, Time Warner and billionaire Ron Lauder, agreed to extend a $300 million loan to the company and buy an additional $86.4 million stake in CEM to address debt concerns.

This will "significantly reduce near-term leverage concerns," Smith argued. "Leverage concerns have been a primary reason for our cautious stance, but this transaction seeks to address them and demonstrates the commitment of key stakeholders."

The move will increase TW's stake from 39 percent to 40 percent.

If the loan remains outstanding for 180 days, CEM has the option to sell to TW and TW has the option buy additional stock to increase its ownership to 49.9 percent.

Importantly, the transaction "puts the group solidly on track to tackling its most difficult problem and focus will turn to the eventual recovery in TV advertising across Central and Eastern Europe," Smith said.

As of 2:15pm London time, CEM's stock was up 13.8 percent at $9.

Twitter: @georgszalai