David Gingell meets with lenders at UBS today
Photo MIchele MOssop
Thursday 6th sept 2012

Nine boss David Gyngell. Photo: Michele Mossop

THE directors of Nine Entertainment could pull the trigger and put the business into administration after senior lenders indicated they were going to reject a late proposal to save the broadcaster.

A group of senior lenders, led by hedge funds Oaktree Capital and Apollo Global Management, are attempting to renegotiate the terms of a proposal that Nine put to its two classes of lenders on Tuesday.

The lower-ranked mezzanine debt holders, led by Goldman Sachs, have already accepted the proposal that would hand them a $150 million stake in Nine in return for cancelling debt with a nominal value of $1 billion.

Some of the original senior lenders have let it be known they will also support a deal as long as their debt gets rolled over at par.

Goldmans has said it will not negotiate any further, putting pressure on the hedge funds to accept the deal which would hand them 85 per cent of Nine in a debt for equity swap. But the hedge funds argue the mezzanine debt is worthless.

''Anyone voting against the Nine board and management proposal or trying to renegotiate it is voting to put Nine into administration,'' a Goldman spokesman said last night.

The hedge funds are expected to trim the equity offer to these lower-ranked lenders in a new proposal.

Unless Nine's chief executive, David Gyngell, and chairman, Peter Bush, can get the hedge funds, or Goldmans, to backtrack, the board may have no choice but to put the media group into administration.

Nine is at the mercy of its lenders and needs a debt restructure to remain a going concern. But

argument has been fierce on whether the mezzanine debt is worth anything in a debt-for-equity swap, or, if the whole company goes to the hedge funds.

The main leverage for mezzanine lenders is that the proposed restructure via a scheme of arrangement requires their approval.

By rejecting the Nine deal, the hedge funds are betting their junior counterparts will back down, or that the funds will be no worse off if Nine goes into administration.In this scenario, senior debt holders would appoint receivers and get outright control of the company that owns Channel Nine. The business would not be unscathed by the process. Mezzanine debt holders and the current owners of Nine, CVC Asia Pacific, are unlikely to receive anything from administration.

Even if all parties agree to negotiate further, they are running out of time.

If an agreement is not reached soon it is not clear that they can execute a restructure before the $2.2 billion of senior debt falls due in February. Nine's directors might then be forced to pull the plug anyway.

Nine has told its lenders it needs an agreement by Tuesday or it will be forced to appoint administrators.