Red Earth Holdings, the holding company of CVC's investment in Nine Entertainment, has removed Adrian MacKenzie from the board of ailing broadcaster, Nine.

CVC said it was moving Mr MacKenzie to make it clear that the Nine board was free to continue to act independently in facilitating a deal between senior and mezzanine debt holders in relation to the capital restructure of the company.

CVC is expected to participate in such a deal alongside Goldman, assuming agreement can be reached with the senior lenders.

The two classes of debt holders were in a standoff about whether the company was worth enough to warrant the less secure lenders, represented by Goldman Sachs, receiving a share of the company as part of a debt for equity swap designed to save Nine from collapse.

Nine chairman Peter Bush and chief executive David Gyngell outlined a proposal to offer the Goldman Sachs a smaller share of equity in the company - reported to be between 5 and 7 per cent - plus warrants that would give them exposure to any upside if the group is later sold at a price that reflects their valuation.

Under the terms of the deal, the executives proposed offering as much as 90 per cent of equity to hedge funds Oaktree Capital and Apollo Global Management, which control most of Nine’s senior debt totalling $2.3 billion.

They have claimed Nine is worth no more than their debt and want 100 per cent of the company in a restructure that would swap their debt for 100 per cent of the equity leaving nothing for Goldman’s mezzanine debt holders.
The lenders are expected to get back to Nine with their response to the offer as early as today.

Goldman Sachs is understood to have wanted a 20 per cent stake in the company, valuing Nine at $2.5 billion. The most recent proposals from Mr Bush and Mr Gyngell came after Goldman Sachs, and the private equity funds rejected each others' restructure proposals.

The media company has spun off assets to try to get a grip on its debt, selling ACP Magazines, publishers of Australian Women's Weekly last month to privately-owned German group Bauer Media Group for $525 million.

Nine’s difficulties are the latest sign of strife in the media sector, where once-in-a-generation changes in the way entertainment is consumed has created an existential challenge for a host of companies. Rival Ten Networks faces a slump in earnings and declines in advertisers, as consumers increasingly look to other forms of entertainment apart of traditional free-to-air television.

Nine, which in addition to the television network, owns Sydney's Allphones Arena and Ticketek, is currently controlled by CVC Capital Partners.

The saga at Nine has claimed the scalp of CVC Capital Partners managing partner Adrian MacKenzie, who resigned from the private equity group after helping the firm participate in a $5.6 billion buyout of it in 2008.

Nine posted a loss of $427.7 million in the year to June 2011, while revenues slipped 1.3 per cent to $1.96 billion.