Oct. 27 (Bloomberg) -- James Packer quit the board of PBL Media Ltd. after the billionaire's company refused to provide more funding to the venture that bought control of his media assets for A$4.5 billion ($2.8 billion) two years ago.

Packer's Consolidated Media Holdings Ltd. may have its 25 percent stake in PBL, which owns Australia's biggest magazine publisher and second-ranked television network, diluted if the venture sells shares to raise capital. John Alexander has also left PBL's board, Consolidated Media said in a statement today.

PBL Media, controlled by buyout firm CVC Asia Pacific, is struggling to repay debt from the 2006 purchase as the credit crunch pushes up interest costs and slowing economic growth in Australia cuts advertising revenue. After selling the 50 percent stake in PBL Media to CVC in 2006, Packer sold a further 25 percent last year for A$515 million.

``The implication here is that PBL Media is unable to service its debt,'' Digby Gilmour, an analyst at Citigroup Inc., said in a note to clients today. ``Concerns around further funding injections to PBL Media have seen the stock trade at a significant discount.''

Consolidated Media shares rose 6 cents, or 3 percent, to A$2.08 at the close of trading in Sydney. The stock has slumped 50 percent this year, cutting its market value to A$1.4 billion.

Refinancing Talks

PBL Media is in talks with senior debt and mezzanine note lenders about restructuring its financing, the company said in an e-mailed statement.

``There have been no indications in those discussions to date that lenders are opposed to such a restructure in the context of a recapitalization of the PBL Media group,'' Chief Executive Officer Ian Law said in the statement. The company is in compliance with all covenants related to the debt, he said

Consolidated Media, based in Sydney, rejected a request to inject more than A$75 million into the venture, the Australian Financial Review reported today, without saying where it got the information.

In addition to its 25 percent stake in PBL Media, the company owns a quarter of Australia's biggest pay-TV broadcaster Foxtel and 50 percent of Premier Media Group, which owns the Fox Sports channels.

In April, Lachlan Murdoch, son of News Corp. Chairman Rupert Murdoch, scrapped a A$3.25 billion offer for Consolidated after losing funding for the deal as Packer refused to lower the asking price for his 38 percent stake.

Surrenders Title

Nine surrendered the title of Australia's most-watched broadcaster to Seven Network Ltd. last year. Nine has a 30.8 percent share of the nation's A$2 billion television advertising market, trailing Seven's 38.4 percent, according to FreeTV Australia, an industry body.

Seven last month said first-half earnings may decline by half. Third-ranked Ten Network Holdings Ltd. this month reported a 12 percent drop in annual operating income.

``With profit warnings from Seven and a weak fourth quarter result from Ten, this only reinforces the tough trading conditions PBL Media faces,'' Alex Pollak, an analyst at Macquarie Group Ltd. in Sydney, said in an Oct. 24 report.

Macquarie, which rates Consolidated Media stock ``outperform,'' expects advertising revenue to fall about 8 percent in 2009.

To contact the reporter on this story: Robert Fenner in Melbourne rfenner@bloomberg.net

Last Updated: October 27, 2008 03:01 EDT