Investors to restructure €1.8bn in ProSiebenSat.1 debt

The private-equity investors that control Germany's ProSiebenSat.1 have hired advisers to restructure about €1.8bn ($2.4bn) in debt held by their holding company, which owns 88 per cent of Europe's second largest commercial broadcaster.

People familiar with the situation said KKR and Permira had hired debt specialist Houlihan Lokey to give a "first scoping" of possible steps to be taken at holding company Lavena, which bundles both firms' stakes in the broadcaster.

The firms were forced to make the move after Munich-based ProSieben said earlier in March it was cutting its dividend to zero from €1.25 per common share the prior year as recession and financial crisis pushed it into loss in 2008.

The firms' holding company Lavena will have to make up for the resulting short-fall – about €120m, more when preference shares are counted – by paying the interest on its debt this year from its own equity, said to amount to about €200m.

While injecting more capital into Lavena should hardly be a problem for KKR and Permira, the situation highlights how investment structures used by private equity investors have been put under strain by the global economic downturn.

ProSieben, which broadcasts in Germany and seven other European countries, has seen its stock fall from €15 per share to €1.15 in a year, forcing KKR to write down 90 per cent and Permira 80 per cent of their €4bn punt on German TV.

But the investors could also profit from this and the fact that banks are desperate for cash by buying back Lavena's debt. It has been trading at massive discounts, although it is not clear the creditor banks would sell at these low levels.

KKR and Permira took control of ProSieben from US investor Haim Saban in 2006 and combined it with their other European TV investment, Luxembourg's SBS, in 2007, with the aim of rivalling RTL, owned by Germany's Bertelsmann.

The investors raised eyebrows in Germany when they voted through a total payout to shareholders of €270m even though ProSieben had reported net income of only €96.2m, even if income from operations hit €385m on €3.2bn in sales.

The onset of recession and a drop in advertising revenues last year led to a net loss of €125m.

The group pledged to cut costs and that reducing its net debt of €3.4bn – quite separate from Lavena's – would be a priority this year.

© The Financial Times Limited 2009. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation