Prisa grasps Liberty lifeline

U.S. investment group agrees share swap

MADRID — Cash-strapped Spanish media giant Prisa has found itself a lifeline.

On Saturday, Prisa agreed a share swap with Liberty Acquisition Holdings Corp., a New York-based investment fund. This involves the injection of $868 million in cash into Prisa, and the conversion of Liberty investors into Prisa shareholders.

Prisa’s new board of directors include Liberty co-founders Nicolas Berggruen and Martin E. Franklin, former Mexican President Ernesto Zedillo, French essayist Alain Minc and former MGM chairman Harry Sloan.

The Liberty investment was one of Prisa’s last chances to secure itself a sustainable economic future.

The Spanish conglom, whose assets include flagship newspaper El Pais and satcaster Digital Plus, had borrowed in 2007 Euros1.9 billion ($2.6 billion) from a seven-bank syndicate led by London-based HSBC Bank. Its debt mountain reached around $5.5 billion by the end of 2009.

“The Liberty deal was the key requirement to extend Prisa’s refinancing agreements with creditor banks until 2013,” said one analyst.

But not the only one. After several debt refinancing agreements, banks wanted Prisa’s pending divestments to be approved before Nov. 30.

In April, Prisa sold 25% of publishing subsid Santillana to the DLJ South American Partners fund. This month, Spain’s anti-trust authorities approved the purchase of Prisa broadcaster Cuatro and the acquisition of a 22% stake in DP by Mediaset-owned Telecinco. Telco giant Telefonica took another 22% in DP.

After the Liberty deal, “Prisa has several problems on the horizon, but at least it’s not going to collapse because of its high debt,” the analyst added.

Under the agreement, the Prisa stake owned by the Polanco family falls to 30% from 70% though they argued they will still maintain control over the company.

“A new corporate focus is required of this family-built company. It must now face its new calling as an agile multinational corporation,” Prisa CEO Juan Luis Cebrian said Saturday.

As a publishing company, one of Prisa’s challenges is to transfer clients from an offline to an online environment and monetize that migration.

“The goal is for a minimum of 20% of group revenues to come from digital operations within five years,” Cebrian said.

Prisa needs to reverse the decline in pay TV subscribers — clients dropped from 2.08 million in 2008 to 1.76 million this August.

In the mid-term, the Liberty deal could allow Prisa to bid for new soccer rights, the king of content in Spain, which are up for renewal from 2014.

Liberty coin could also drive company’s U.S. expansion, the analyst added.