LONG-TERM DEBT AND OTHER FINANCING ARRANGEMENTS | 3 Months Ended |
Mar. 31, 2014 |
Debt Disclosure [Abstract] | ' |
LONG-TERM DEBT AND OTHER FINANCING ARRANGEMENTS | ' |
LONG-TERM DEBT AND OTHER FINANCING ARRANGEMENTS |
Summary |
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| March 31, 2014 | | | December 31, 2013 | | | | | | | | | |
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Senior debt | $ | 958,754 | | | $ | 956,956 | | | | | | | | | |
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Total credit facilities and capital leases | 7,848 | | | 8,101 | | | | | | | | | |
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Total long-term debt and other financing arrangements | 966,602 | | | 965,057 | | | | | | | | | |
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Less: current maturities | (1,772 | ) | | (2,114 | ) | | | | | | | | |
Total non-current long-term debt and other financing arrangements | $ | 964,830 | | | $ | 962,943 | | | | | | | | | |
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Senior Debt |
Our senior debt comprised the following as at March 31, 2014 and December 31, 2013: |
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| Carrying Amount | | Fair Value |
| March 31, | | | December 31, | | | March 31, | | | December 31, | |
2014 | 2013 | 2014 | 2013 |
2015 Convertible Notes | 243,676 | | | 241,193 | | | 254,404 | | | 237,011 | |
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2016 Fixed Rate Notes | 378,882 | | | 379,182 | | | 398,956 | | | 374,573 | |
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2017 Fixed Rate Notes | 336,196 | | | 336,581 | | | 353,679 | | | 344,223 | |
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| $ | 958,754 | | | $ | 956,956 | | | $ | 1,007,039 | | | $ | 955,807 | |
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Financing Transactions |
On February 28, 2014, we announced our intention to conduct a rights offering (the “Rights Offering”) and a series of related financing transactions with Time Warner Media Holdings B.V. ("TW Investor") and Time Warner Inc. (“Time Warner”). The Rights Offering and related financing transactions have been undertaken pursuant to a framework agreement (the “Framework Agreement”) dated February 28, 2014 among the Company, TW Investor and Time Warner. |
In the Rights Offering, we distributed 3,418,467 non-transferable rights at no charge to eligible holders of record as of March 21, 2014 of the Company’s outstanding (a) shares of Class A Common Stock, (b) Series A Preferred Share (allocated on an as-converted basis) and (c) Series B Preferred Shares (allocated on an as-converted basis as of December 25, 2013). Each right enabled an eligible holder to purchase a unit (a "Unit') at the subscription price of US$100.00 per unit ("the Subscription Price") with each Unit consisting of (a) a 15.0% Senior Secured Note due 2017 (each, a "2017 PIK Note" and collectively the "2017 PIK Notes") in the original principal amount of US$ 100.00 and (b) 21 unit warrants (each, a "Unit Warrant"), with each Unit Warrant entitling the holder thereof to purchase one share of our Class A common stock. In addition, we agreed to sell and TW Investor agreed to purchase 581,533 Units at the Subscription Price in a private placement (the "TW Private Placement") and TW Investor also committed to purchase any Units not purchased through the exercise of rights in the Rights Offering (the "Backstop Private Placement"). |
The 2017 PIK Notes bear interest at a rate of 15.0% per annum, which the Company must pay in kind on a semi-annual basis until November 15, 2015 by adding such accrued interest to the principal amount of the 2017 PIK Notes and thereafter may pay such accrued interest in cash or in kind. The 2017 PIK Notes mature on December 1, 2017. |
Also on February 28, 2014, the Company entered into a term loan credit agreement with Time Warner, which provides that Time Warner will make a term loan (the “2017 Term Loan”) to the Company to be drawn concurrently with the closing of the Rights Offering in the aggregate principal amount of US$ 30.0 million. The 2017 Term Loan bears interest at a rate of 15.0% per annum, which is payable quarterly, either, at the election of the Company, fully in cash or in kind by adding such accrued interest to the principal amount of the 2017 Term Loan. The 2017 Term Loan matures on December 1, 2017. |
In addition, under the Framework Agreement, Time Warner agreed to extend to the Company a revolving credit facility that will mature on December 1, 2017 in the aggregate principal amount of US$ 115.0 million (the “2017 Revolving Credit Facility”), subject to certain conditions, including the drawing of the 2017 Term Loan. Amounts drawn under the 2017 Revolving Credit Facility will bear interest at a rate per annum based on, at our option, an alternative base rate plus 13% or an adjusted LIBO rate plus 14%, which the Company may pay in cash or in kind by adding such accrued interest to the applicable principal amount drawn under the 2017 Revolving Credit Facility. The 2017 Revolving Credit Facility matures on December 1, 2017. |
The 2017 PIK Notes, the 2017 Term Loan and the 2017 Revolving Credit Facility are each fully and unconditionally guaranteed, jointly and severally, by our wholly owned subsidiaries Central European Media Enterprises N.V. (“CME NV”) and CME Media Enterprises B.V. ("CME BV") and are secured by separate pledges of the shares of CME NV and CME BV. |
The Rights Offering and series of related financing transactions, including the drawing of the 2017 Term Loan, were closed on May 2, 2014. We applied the net proceeds of the Rights Offering and related financing transactions and a portion of the 2017 Term Loan to discharge the indenture governing the 11.625% Senior Notes due 2016 (the "2016 Fixed Rate Notes") on May 2, 2014, including the early redemption premium and accrued interest thereon of approximately EUR 15.9 million (approximately US$ 22.0 million, at transaction date exchange rates) and EUR 6.7 million (approximately US$ 9.3 million at transaction date exchange rates), respectively. See Note 23, "Subsequent Events" for further information related to the financing transactions occurring subsequent to March 31, 2014. |
Convertible Notes |
2015 Convertible Notes |
As at March 31, 2014, the principal amount of our 5.0% Senior Convertible Notes due 2015 (the “2015 Convertible Notes”), outstanding was US$ 261.0 million. |
Interest is payable semi-annually in arrears on each May 15 and November 15. The 2015 Convertible Notes mature on November 15, 2015. The fair value of the liability component of the 2015 Convertible Notes as at March 31, 2014 was calculated by multiplying the outstanding debt by the traded market price. This measurement of estimated fair value uses Level 2 inputs as described in Note 12, "Financial Instruments and Fair Value Measurements". |
The 2015 Convertible Notes are secured senior obligations and rank pari passu with all existing and future senior indebtedness and are effectively subordinated to all existing and future indebtedness of our subsidiaries. The amounts outstanding are guaranteed by CME NV and CME BV and are secured by a pledge of shares of those companies. |
Prior to August 15, 2015, the 2015 Convertible Notes are convertible following certain events and from that date, at any time, based on an initial conversion rate of 20 shares of our Class A common stock per US$ 1,000 principal amount of 2015 Convertible Notes (which is equivalent to an initial conversion price of US$ 50.00 per share). The conversion rate is subject to adjustment if we make certain distributions to the holders of shares of our Class A common stock, undergo certain corporate transactions or a fundamental change, and in other circumstances specified in the 2015 Convertible Notes. From time to time up to and including August 15, 2015, we will have the right to elect to deliver (i) shares of our Class A common stock, (ii) cash, or (iii) cash and, if applicable, shares of our Class A common stock upon conversion of the 2015 Convertible Notes. At present, we have elected to deliver cash and, if applicable, shares of our Class A common stock. As at March 31, 2014, the 2015 Convertible Notes may not be converted. In addition, the holders of the 2015 Convertible Notes have the right to put the 2015 Convertible Notes to us for cash equal to the aggregate principal amount of the 2015 Convertible Notes plus accrued but unpaid interest thereon following the occurrence of certain specified fundamental changes (including a change of control (which includes the acquisition by a person or group (as such term is defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of beneficial ownership of more than 50% of the outstanding shares of our Class A common stock), certain mergers, insolvency and a delisting). |
We separately account for the liability and equity components of the 2015 Convertible Notes. The embedded conversion option is not accounted for as a derivative. |
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| Principal Amount of Liability Component | | | Unamortized Discount | | | Net Carrying Amount | | | Equity Component | |
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BALANCE December 31, 2013 | $ | 261,034 | | | $ | (19,841 | ) | | $ | 241,193 | | | $ | 11,907 | |
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Amortization of debt issuance discount | — | | | 2,483 | | | 2,483 | | | — | |
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BALANCE March 31, 2014 | $ | 261,034 | | | $ | (17,358 | ) | | $ | 243,676 | | | $ | 11,907 | |
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The issuance discount is being amortized over the life of the 2015 Convertible Notes using the effective interest method. The effective interest rate on the liability component was 10.0%. |
Certain other derivative instruments have been identified as being embedded in the 2015 Convertible Notes, but as they are considered to be clearly and closely related to the 2015 Convertible Notes they are not accounted for separately. |
Fixed Rate Notes |
2016 Fixed Rate Notes |
As at March 31, 2014, the principal amount of our 2016 Fixed Rate Notes outstanding was EUR 273.0 million (approximately US$ 376.4 million). As described under the heading 'Financing Transactions', we discharged the indenture governing the 2016 Fixed Rate Notes on May 2, 2014. The 2016 Fixed Rate Notes are classified as non-current obligations as at March 31, 2014 as we have the intent and ability to refinance on a long-term basis with the proceeds of the issuance of the 2017 PIK Notes and the 2017 Term Loan. |
The fair value of the 2016 Fixed Rate Notes as at March 31, 2014 and December 31, 2013 was calculated by multiplying the outstanding debt by the traded market price. This measurement of estimated fair value uses Level 2 inputs as described in Note 12, "Financial Instruments and Fair Value Measurements". |
2017 Fixed Rate Notes |
As at March 31, 2014, the principal amount of the 9.0% Senior Secured Notes due 2017 ("the 2017 Fixed Rate Notes" and collectively with the 2016 Fixed Rate Notes, the "Senior Notes") outstanding was EUR 240.0 million (approximately US$ 330.9 million). |
Interest is payable semi-annually in arrears on each May 1 and November 1. The 2017 Fixed Rate Notes mature on November 1, 2017. The fair value of the 2017 Fixed Rate Notes as at March 31, 2014 and December 31, 2013 was calculated by multiplying the outstanding debt by the traded market price. This measurement of estimated fair value uses Level 2 inputs as described in Note 12, "Financial Instruments and Fair Value Measurements". |
In the first quarter of 2014, our wholly-owned subsidiary CET 21 spol. s r.o. ("CET 21") solicited and received consents from holders of the 2017 Fixed Rate Notes. We solicited consent to certain amendments to the 2017 Indenture (as defined below) to permit the financing transaction described above. We paid a consent fee to holders of the 2017 Fixed Rate Notes of EUR 0.6 million (US$ 0.8 million at the transaction date), which is being amortized over the life of the 2017 Fixed Rate Notes using the straight-line method, which approximates the effective interest method. |
The 2017 Fixed Rate Notes are secured senior obligations of CET 21. The 2017 Fixed Rate Notes rank pari passu with all existing and future senior indebtedness of CET 21 and are effectively subordinated to all existing and future indebtedness of our other subsidiaries. The amounts outstanding are guaranteed by CME Ltd. and by our wholly-owned subsidiaries CME NV, CME BV, CME Investments B.V., CME Slovak Holdings B.V. (“CME SH”) and MARKÍZA-SLOVAKIA, spol. s r.o. (“Markiza”) and are secured by a pledge of the shares of CME NV, CME BV, CET 21 and CME SH, as well as an assignment of certain contractual rights. The terms of the 2017 Fixed Rate Notes restrict the manner in which the Company’s and CET 21’s business is conducted, including the incurrence of additional indebtedness, the making of investments, the payment of dividends or the making of other distributions, entering into certain affiliate transactions and the sale of assets. |
In the event that (A) there is a change in control by which (i) any party other than certain of our present shareholders becomes the beneficial owner of more than 35% of our total voting power; (ii) we agree to sell substantially all of our operating assets; or (iii) there is a change in the composition of a majority of our Board of Directors; and (B) on the 60th day following any such change of control the rating of the 2017 Fixed Rate Notes is either withdrawn or downgraded from the rating in effect prior to the announcement of such change of control, we can be required to repurchase the 2017 Fixed Rate Notes at a purchase price in cash equal to 101.0% of the principal amount of the 2017 Fixed Rate Notes plus accrued and unpaid interest to the date of purchase. |
The 2017 Fixed Rate Notes are redeemable at our option, in whole or in part, at the redemption prices set forth below: |
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| Fixed Rate Notes | | | | | | | | | | | | | | |
From | Redemption Price | | | | | | | | | | | | | |
November 1, 2014 to October 31, 2015 | 104.5 | % | | | | | | | | | | | | | |
November 1, 2015 to October 31, 2016 | 102.25 | % | | | | | | | | | | | | | |
November 1, 2016 and thereafter | 100 | % | | | | | | | | | | | | | |
Certain derivative instruments, including redemption call options and change of control and asset disposition put options, have been identified as being embedded in the 2017 Fixed Rate Notes but as they are considered clearly and closely related to the 2017 Fixed Rate Notes, they are not accounted for separately. |
Indenture Covenants |
Under the terms of the indentures governing the 2016 Fixed Rate Notes and the 2017 Fixed Rate Notes (the “2016 Indenture” and the “2017 Indenture”, respectively), we are largely restricted from raising debt at the corporate level or making certain payments or investments if the ratio of Consolidated EBITDA to Consolidated Interest Expense (as defined in the 2016 Indenture and the 2017 Indenture) (the “Coverage Ratio”) is less than 2.0 times. For this purpose, the calculation includes CME Ltd. and its subsidiaries that are "Restricted Subsidiaries," as defined in the indentures. In addition, under the 2017 Indenture, CET 21 and its subsidiaries are restricted from incurring indebtedness if the ratio of Consolidated Indebtedness to Consolidated EBITDA of CET 21 (both as defined in the 2017 Indenture) and its Restricted Subsidiaries would exceed 2.25 times. |
Credit Facilities and Capital Lease Obligations |
Credit facilities and capital lease obligations comprised the following at March 31, 2014 and December 31, 2013: |
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| | March 31, 2014 | | | December 31, 2013 | | | | | | | | |
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Credit facilities | (a) – (c) | $ | 3,597 | | | $ | 3,755 | | | | | | | | |
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Capital leases | | 4,251 | | | 4,346 | | | | | | | | |
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Total credit facilities and capital leases | | 7,848 | | | 8,101 | | | | | | | | |
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Less: current maturities | | (1,772 | ) | | (2,114 | ) | | | | | | | |
Total non-current credit facilities and capital leases | | $ | 6,076 | | | $ | 5,987 | | | | | | | | |
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(a) | We have a cash pooling arrangement with Bank Mendes Gans (“BMG”), a subsidiary of ING Bank N.V. (“ING”), which enables us to receive credit across the group in respect of cash balances which our subsidiaries deposit with BMG. Cash deposited by our subsidiaries with BMG is pledged as security against the drawings of other subsidiaries up to the amount deposited. | | | | | | | | | | | | | | |
As at March 31, 2014, we had deposits of US$ 20.3 million in and drawings of US$ 0.3 million on the BMG cash pool. Interest is earned on deposits at the relevant money market rate. As at December 31, 2013, we had deposits of US$ 21.8 million in and drawings of US$ 0.8 million on the BMG cash pool. |
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(b) | As at March 31, 2014 and December 31, 2013, there were no drawings outstanding under a CZK 860.0 million (approximately US$ 43.2 million) factoring framework agreement with Factoring Ceska Sporitelna (“FCS”). Under this facility up to CZK 860.0 million (approximately US$ 43.2 million) may be factored on a recourse or non-recourse basis. The facility bears interest at one-month PRIBOR plus 2.5% for the period that actively assigned accounts receivable are outstanding. | | | | | | | | | | | | | | |
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(c) | At March 31, 2014, our operations in Romania had an aggregate principal amount of RON 12.5 million (approximately US$ 3.9 million) (December 31, 2013, RON 12.5 million, approximately US$ 3.9 million based on March 31, 2014 rates) of loans outstanding with the Central National al Cinematografei ("CNC"), a Romanian governmental organization which provides financing for qualifying filmmaking projects. Upon acceptance of a particular project, the CNC awards an agreed level of funding to each project in the form of an interest-free loan. Loans from the CNC are typically advanced for a period of ten years and are repaid through the proceeds from the distribution of the film content. At March 31, 2014, we had 16 loans outstanding with the CNC with maturity dates ranging from 2014 to 2023. The carrying amounts at March 31, 2014 and December 31, 2013 are net of a fair value adjustment of US$ 0.6 million and US$ 0.6 million, respectively, arising on acquisition. | | | | | | | | | | | | | | |
Total Group |
At March 31, 2014, the maturity of our senior debt and credit facilities was as follows: |
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2014 | $ | 735 | | | | | | | | | | | | | |
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2015 | 261,034 | | | | | | | | | | | | | |
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2016 (1) | 376,374 | | | | | | | | | | | | | |
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2017 | 330,914 | | | | | | | | | | | | | |
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2018 | 526 | | | | | | | | | | | | | |
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2019 and thereafter | 2,915 | | | | | | | | | | | | | |
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Total senior debt and credit facilities | 972,498 | | | | | | | | | | | | | |
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Net discount | (10,147 | ) | | | | | | | | | | | | |
Carrying amount of senior debt and credit facilities | $ | 962,351 | | | | | | | | | | | | | |
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(1) Amount represents the EUR 273.0 million (approximately US$ 376.4 million) aggregate principal amount of the 2016 Fixed Rate Notes, which was discharged on May 2, 2014. |
Capital Lease Commitments |
We lease certain of our office and broadcast facilities as well as machinery and equipment under various leasing arrangements. The future minimum lease payments, by year and in the aggregate, under capital leases with initial or remaining non-cancellable lease terms in excess of one year, consisted of the following at March 31, 2014: |
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2014 | $ | 937 | | | | | | | | | | | | | |
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2015 | 1,139 | | | | | | | | | | | | | |
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2016 | 900 | | | | | | | | | | | | | |
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2017 | 724 | | | | | | | | | | | | | |
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2018 | 383 | | | | | | | | | | | | | |
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2019 and thereafter | 467 | | | | | | | | | | | | | |
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Total undiscounted payments | 4,550 | | | | | | | | | | | | | |
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Less: amount representing interest | (299 | ) | | | | | | | | | | | | |
Present value of net minimum lease payments | $ | 4,251 | | | | | | | | | | | | | |
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