ProSieben shares rally

Investors encouraged by hopes of debt reduction

COLOGNE, Germany -- While RTL Group put out some gloomy first quarter results, the news this week for competitor ProSiebenSat1 was -- dare we say it -- almost chipper.

Shares at the pan-European broadcaster have undergone a spectacular rally. By late afternoon Thursday, ProSieben stock was trading at €3.34 ($4.48) a 12% gain for the day and more than 50% up on the same time last week.

In fact, ProSieben shares have nearly quadrupled since hitting rock bottom at around $1.20 in March. Thursday's jump was the ninth-straight gain for the long-suffering stock.

Investors are returning in droves, apparently encouraged by hopeful reports that ProSieben owners KKR and Permira may be close to easing ProSieben's crippling debt burden.

Unconfirmed media reports have claimed that KKR is looking to buy back, for a fraction of its face value, the €1.8 billion ($2.4 billion) in debt held by Lavena, the KKR/Permira venture that controls 56.7% of ProSiebenSat1.

KKR is thought to be tapping international investors for fresh cash to pump back into its European operations, including ProSieben. Insiders suggest KKR could buy back Lavena's debt at 15% of face value, or €270 million ($362 million) total.

Such a move would go a long way to reviving ProSieben's fortunes. The pan-European broadcaster is weighed down by debts totaling €3.4 billion ($4.6). Interest payments alone total €250 million ($335 million) annually.

Getting that red ink off the balance sheet is essential as the company tries to weather the global economic downturn.

KKR, Permira and ProSieben all declined comment.