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Mal Maiden: bankers slice the Channel Nine salami

Business columnist Malcolm Maiden takes a look at the news in this week's business market.

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Nine Entertainment's junior lenders, led by Goldman Sachs, have agreed to the media group's proposal to end the deadlock that is threatening to send the company into administration.

Goldman Sachs Mezzanine Partners understands the importance of keeping this iconic Australian broacaster out of administration. 

Nine's board was informed this morning that Goldman Sachs has agreed to the deal under which mezzanine debt holders would emerge with 7.5 per cent of Nine's equity and warrants that would give them upside to any future sale of Nine above the current estimates of its value.

"Goldman Sachs Mezzanine Partners understands the importance of keeping this iconic Australian broadcaster out of administration and is supporting the Nine board and management," a spokesman said. "Therefore Goldman Sachs Mezzanine Partners has agreed to endorse Nine's proposal."

Goldman has told Nine's directors that it will not negotiate any further after accepting their proposal. This means that, if the senior lenders walk away from the proposal, Nine may have no option other than to appoint administrators to the owner of the Nine network.

Pressure on senior lenders

Goldman's support for the Nine deal puts pressure on the senior debt holders who argue Nine is not worth more than the $2.3 billion they are owed, which means they should be able to swap their debt for 100 per cent of Nine's equity.

The proposal by Nine chairman Peter Bush and chief executive David Gyngell, tabled late yesterday, would hand the remaining 92.5 per cent of Nine to senior lenders led by Oaktree Capital and Apollo Global Management.

Some of Nine's original senior lenders are expected to retain their loans if the proposed restructure goes ahead, leaving Nine with a manageable $1 billion worth of debt.

All of Nine's lenders are expected to get back to the company with their response to the offer as early as today.
The most recent proposals from Mr Bush and Mr Gyngell came after Goldman Sachs, and the hedge fund-led senior lenders, rejected each others' restructure proposals.

In related news today, the chief executive of Nine's current owner CVC, Adrian MacKenzie, has stood down from the Nine board to remove any perceived conflict of interest before any potential deal.

Mr MacKenzie, who will also step down as chief executive of CVC by the end of the year, oversaw CVC's acquisition of Nine in 2007. The private equity firm is expected to crystalise a $2 billion loss on Nine - its largest ever loss on a single private-equity deal in Asia.

CVC is still represented on the board by Andrew Cummins.

Deadline looms

The $2.3 billion worth of debt owned by the senior lenders must be repaid by a February deadline, and negotiations are going close to the wire for a complex deal that would take some months to finalise.

Nine, one of the biggest private equity-owned companies in Australia, has assets including the Channel Nine free-to-air network, ticketing agency Ticketek and a 50 per cent stake in online site ninemsn.com.

CVC paid $5.3 billion in cash and debt for Nine in two deals at the peak of the buyout boom in 2006-08, overloading on cheap debt just before the global financial crisis hit.

Since then, advertising revenues have collapsed across the media sector, slashing profits at Nine and rival TV networks.