German DTH provider Sky Deutschland is looking to get an additional E60m from its largest shareholder, media giant News Corp, in order to invest in the HD market.
The shareholder loan will be raised from News Adelaide, a wholly-owned subsidiary of News…
German DTH provider Sky Deutschland is looking to get an additional E60m from its largest shareholder, media giant News Corp, in order to invest in the HD market.
The shareholder loan will be raised from News Adelaide, a wholly-owned subsidiary of News Corp, by December 21, 2011.
“With the development of the business in Q4 2010 confirming the positive trends in the business seen earlier in the year, Sky Deutschland has agreed with News Corp to increase the gross proceeds from the financing measures announced on August 2, 2010 from a minimum of ?340m to ?400m.
This improves Sky’s financial flexibility and provides for additional investment to build on the strong underlying momentum, particularly in HD,” said the company in its financial results mid-January.
This shareholder loan will be subordinated to Sky Deutschland’s credit facilities, have a maturity of three years to March 31, 2014 and carry an annual interest rate of 12%, which would accrue and be payable at maturity, Sky Deutschland explained in the statement. The loan can be converted into equity by News Adelaide at a later stage, subject to the approval of Sky Deutschland and its shareholders.
Last summer, News Corp had agreed to backstop Sky Deutschland’s proposed ?340m financing, which predominantly comprised a rights offering.
Completed at the end of September 2010, the rights issue allowed the unprofitable Germany pay TV provider to raise ?177m by placing a total of 169 million shares. However, investor demand was not as hoped and News Corp had to buy 64% of the shares that were sold, leading to its stake in Sky Deutschland increasing from 45.42% to 49.9%.
To raise the remainder of the planned financing, Sky Deutschland said that it would raise ?163m through a convertible bond from News Corp by January 31, 2011.
The unsecured subordinated bond is expected to be convertible for up to 53.9 million underlying ordinary shares taken from its contingent capital. It will carry a coupon of 5.5%- 6.5% and have an initial conversion premium of 25%-30% with a minimum conversion price of ?1. The bond will also be subject to a 40-day holding period.
RBS and UniCredit Bank are acting as joint global coordinators and joint lead managers for the company’s seventh capital increase in five years.
Sky Deutschland continues to struggle to reach profitability in a German market in which the cable operators dominate. The company, buoyed by News Corp’s continued financial support, has spent heavily on marketing its product and while this seemingly did not have the impact hoped for, the company’s fourth quarter results showed that the strategy may finally be having an effect. In the final quarter of 2010, Sky Deutschland said it added 131,000 net customers giving it a total of 2.65 million subscribers. This is a significant increase on the 39,000 additional customers it attracted in Q4 2009.
The company also explained that the full year 2010 EBIDTA loss would be at the lower end of the previously estimated range, at between ?260m and ?270m.
