Premiere under debt restructuring plan

News Corp. negotiates long-term loans totaling $734 mil

COLOGNE, Germany -- Just in time for Christmas, News Corp. has finally unveiled its rescue plan for long-suffering German pay TV operation Premiere.

On Tuesday, the company took the wraps off a major restructuring of debt and capital increases intended to provide CEO Mark Williams with the wiggle room necessary to bring Premiere back to profitability by 2011.

Premiere and News Corp. have negotiated new long-term loans totaling 525 million euros ($734 million) with its bank consortium. The loans, which run to 2013, are conditional on Premiere raising an additional 450 million euros ($629 million) through the issue of new shares.

Premiere will start in January, issuing as many as 10.2 million new shares to raise a minimum of 25 million euros ($35 million). News Corp. will pick up any unsold stock as long as its total stake does not exceed 29.9%. The bank consortium will match the capital increase with a short-term loan of up to 25 million euros ($35 million).

The 50 million euro ($70 million) boost is intended to cover Premiere's immediate expenses until the second share issue -- scheduled for the second quarter.

That issue is the core of Williams' rescue plan. The new bank loans -- a 275 million euro ($385 million) term loan and a 250 million euro ($350 million) revolving facility -- are conditional on Premiere raising 450 million euros ($629 million) on its own through the two emissions.

News Corp. will provide a backstop, buying unsold Premiere shares, provided certain conditions are met. Among these is a guarantee that Premiere will be able to access the new bank loans and an exemption from the usual requirement under German law that would force News Corp. to make a buyout offer to minority shareholders if its stake in Premiere exceeds 30%.

Provided Premiere shareholders approve the plan in a vote early next year, Williams will have the capital to carry out his restructuring of the company. His strategy is to bring Premiere's money-losing business model more in line with News Corp.'s successful operations in the U.K. (BSkyB) and Italy (Sky Italia). Core elements of this strategy include focusing on long-term, premium customers and an increase in the amount and diversity of programming on offer.

The restructuring will force Premiere into the red, with a negative cash flow of between 250 million euros and 275 million euros ($350 million-$385 million) and a "significant" operating loss expected for 2009. Williams is forecasting a break even in 2010 and profit by 2011.

For this year, Premiere expects an EBITDA loss of 40 million euros-60 million euros ($56 million-$84 million) and net debt of 320 million euros ($447 million).

Premiere shares dropped 4% on the news Tuesday and were trading just above 4 euros ($5.6).