Central European offers to swap out 3% convertibles, notes due 2016

By Susanna Moon

Chicago, Feb. 25 - Central European Distribution Corp. and its subsidiary CEDC Finance Corp. International, Inc. began exchange offers for their outstanding 3% convertible senior notes due 2013 and two series of senior secured notes due 2016.

Separately, a committee of 2016 noteholders and Roust Trading Ltd., a major CEDC investor, have proposed an alternative to the company's exchange offers, according to a press release filed with the Securities and Exchange Commission.

The alternative proposal has not been formally presented to the company's board of directors and, therefore, the board has taken no position on it, the company noted.

The exchange offers are part of a financial restructuring that could reduce senior note debt by more than $750 million, the release noted.

The exchange offers were prompted in part by the upcoming March 15 maturity of the convertible senior notes.

The company said it also believes that a restructuring of the notes will improve its financial strength and flexibility and that it was "engaged in ongoing and constructive discussions with representatives of its major stakeholders about the terms of the exchange offers."

Company's exchange offers

In the company's exchange offers, for each $1,000 principal amount of 9 1/8% senior secured notes due 2016, holders will receive 16.52 new common shares and $508.21 principal amount of 6½% senior secured notes due 2020.

For each €1,000 of 8 7/8% senior secured notes due 2016, holders will receive 22.18 new common shares and $682.37 principal amount of 6½% senior secured notes due 2020.

Holders also will receive 8.86 new common shares in exchange for the 3% convertible senior notes due 2013.

The exchange offers will end at 11:59 p.m. ET on March 22.

The company also is soliciting holders of the notes due 2016 for amendments to the notes and holders of all the notes to approve a backup Chapter 11 plan of reorganization.

Assuming 100% participation in the exchange offers, holders of the notes due 2016 collectively would receive 65% of the company's common stock. The notes have an outstanding principal balance of about $957 million and, assuming an exchange rate of $1.3427 to €1.00, would be replaced with $500 million principal amount of new 6½% senior secured notes due 2020.

Holders of the convertibles, with an outstanding principal balance of about $258 million, and RTL, which is owed $20 million of unsecured notes, together would share pro rata in 10% of CEDC's common stock. A separate $50 million secured credit facility provided by RTL would be converted into 20% of CEDC's common stock.

Insufficient funds

The company's "current enterprise value is insufficient to cover the debt and hence distributions to creditors will not be enough to pay them in full. CEDC nevertheless has structured a proposal that affords an opportunity for its shareholders to participate in the upside of the company's turnaround. Accordingly, existing shareholders are being offered a 5% stake in the reorganized company," the press release noted.

The exchange offers are subject to a minimum tender condition.

If the company receives enough tenders, it may complete the exchange offers. Otherwise, the said it may choose to complete the restructuring through a fall-back, pre-packaged plan of reorganization through a filing in the U.S. Bankruptcy Court for the District of Delaware.

"Absent requisite support for the plan, the company may be forced to explore other immediate alternatives," the release said.

Garden City Group (800 878-1684 or 614 763-6110 direct-dial toll international) is the information and exchange agent.

Central European Media is a telecommunications company domiciled in Hamilton, Bermuda.

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