SBS options Media notes

Principal amount is $40 mil, to mature at end of 2001

By ELIZABETH GUIDER

Central European Media Enterprises, the struggling pan-Euro station group, said Friday that rival station group SBS has exercised its call option on notes due from ITI, a Polish-based media company, for some $37 million.

The ITI notes have a principal amount of $40 million and mature at the end of 2001.

CME originally acquired the ITI notes as part of the sale of its interest in TVN Poland to ITI in December 1998. The call option was granted to SBS as part of CME's sale of its Hungarian assets to SBS in February of this year.

SBS and CME had planned to merge back in 1998, but troubles at CME's Prague station Nova eventually scuppered the deal. These current transactions are part of the winding down of the complicated merger agreement between CME and SBS. In essence, SBS agreed to a buyout of CME's Hungarian assets, while CME agreed to buy out SBS' Slovenian station interests.

CME also said Friday that it has finalized a purchase agreement to acquire for $12.5 million at least a 98% interest in Kanal A, the second-ranked station in Slovenia, by Aug. 18.

As part of this agreement, $12.5 million of the SBS proceeds from the exercise of the call option on the ITI notes will be held in escrow until either Aug. 18 or the closing of the Kanal A acquisition. This transaction is subject to regulatory approval and certain other conditions.

"The exercise of the call option on the ITI notes significantly strengthens our liquidity position, and CME's subsequent agreement to purchase Kanal A will enable us to provide Slovenia's TV viewers with two compelling and distinct commercial TV channels while increasing the positive cash flow we currently generate in the market," CME prexy and CEO Fred Klinkhammer said.