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CVC hands Packer his Alan Bond moment

"You only ever get one Alan Bond in your life and I've had mine," the late Kerry Packer famously said of the West Australian who forked out $1.2 billion for the Nine Network back in 1987 and subsequently lost the lot. Twenty years later, his son James had the private equity player CVC Asia Pacific, which effectively paid more than $5 billion for the network and its magazine division.

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CVC paid Packer's Publishing & Broadcasting Ltd (PBL) $1.46 billion in cash for a 75 per cent stake in the media assets and also took on $3.6 billion worth of debt from PBL.

One year on, the high debt and flimsy equity component meant the business was worthless.

Nine has, in effect, been on deathwatch ever since with the financial crisis, making it virtually impossible to refinance the debt and emboldened lenders looking to take control of the business instead.

The only question now is how ownership is transferred from CVC to other parties - most likely the hedge funds that control $2.7 billion of Nine's senior debt, Apollo Global Management and Oaktree Capital, which are seeking a debt-for-equity swap that would give them 100 per cent of Nine.


This would represent salvation from what remains of Nine Entertainment, which will already be reducing its $4 billion debt load later this year with the $500 million sale of its magazine business, ACP, to German publishers Bauer Media.

A restructure to reduce, or eliminate, Nine's crippling debt load will leave a business that is actually generating strong cash flows and starting to cut Seven's ratings lead. When the business is deemed to be healthy enough, the call will then be for a refloat of the business. The question is whether the public wants to buy into the float of an iconic business given the continuing disappointment of Myer.

For CVC there is no deal that will mitigate the disaster that has been its foray into Nine.

CVC has now lost all of the $2 billion it injected into the Nine group, which struggled under the weight of its high debt load, bad conditions in the media industry, and Nine losing its ratings crown to Seven.

And while James Packer made a fortune from his well-timed sale, not all of it was well spent. Mr Packer subsequently blew a large part of the privateer's largesse on the US casino market just as the financial crisis hit. Mr Packer and fellow investors in his casino operator, Crown, walked away from that casino binge $1.4 billion lighter after the company wrote the investment down to zero in 2009.

Crown was saved from further loss when its lawyers successfully negotiated the exit of a $US1.75 billion deal to buy the entire Cannery Casino Resorts business in the US.


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