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Nine deal scramble - MacKenzie exits board

In a bid to stave off receivership at Nine Entertainment by throwing a bone to the hedge funds, private equity group and owner of Nine, CVC Asia Pacific, has decided to take Adrian MacKenzie off the board of Nine.

It follows a decision last month that MacKenzie would retire from the post of CVC’s CEO at the end of the year.

It is understood that the hedge funds who are owed $2.3 billion in debt have been complaining about the potential conflict of interest with MacKenzie, who is CEO of CVC and who is also on the board of Nine, at such a crucial time in negotiations.

To remove any stench of independence issues, CVC has agreed that Mr MacKenzie will step down immediately to allow discussions to continue.

Few companies have been given as much air time about whether they will be doomed to receivership or saved by the bell than Nine, but after months of jawboning discussions are now getting to the pointy end.

Scramble for compromise

All parties have thrown their proposals into the mixing pot and the discussions are now about trying to get a compromise before the end of the month to get a scheme of arrangement in place.

There is $3.3 billion of debt due, and the hedge funds, which are most exposed, want 100 per cent equity in Nine, while Goldman Sachs, which has sunk $1 billion in mezzanine debt into the group wants 20 per cent of Nine’s equity, a percentage of which will be shared with private equity group CVC Asia Pacific. If the hedge fund proposal gets up it means zero for Goldman Sachs and CVC, which is an unlikely outcome.

The Nine management jumped into the fray yesterday and cooked up another deal designed to get the parties to meet somewhere in the middle.

If a compromise isn’t reached then it is receivership, here we come.

In its new proposal, Nine management suggested that Goldman receive 5 per cent to 10 per cent equity in Nine, lower debt and 15 per cent warrants over the future sale of the company if it manages to get a price tag of more than $2.3 billion.

Haircut for all parties

It means a haircut for all parties but at least it keeps the group out of receivership, which would be damaging for the business. Indeed, the only real winners in a receivership are the receivers.

But if the company is worth more than $2.3 billion and a deal can’t be had, then receivership might be the best shot for Goldman’s as it would get something back, as opposed to what the hedge funds are offering, which is nothing.

There is a lot of posturing going on between all parties but as they get closer to the deadline, the belief is that commonsense will prevail and a compromise will be had. Meanwhile, there will be a lot of interested parties waiting in the wings hoping for a receivership to buy the assets at bargain basement prices.

It has long been speculated that media mogul Bruce Gordon, who owns the Nine stations in Adelaide and Perth through his Win Corp is interested in buying Nine Network if it is put up for sale - at a reasonable multiple.

Preliminary discussions are believed to have taken place. Gordon also has a stake in Ten Network.

4 comments so far

  • What rights does mezz have other than watching the money slip down the drain. As the lowest part of the capital structure without voting rights and an inability to force the issue because senior has that right, its all money wasted.
    What they and the senior lenders should be asking is how if Channel Nine was doing so well what went wrong in the Holding Company. As a lender one has to think where the $1 bio obligation is coming from to pay for League Rights where the money is to come from to fund Cricket and how they will pay a number of well paid Personalities and Executives.
    There is probably a lot going behind the scenes but where is the equity going to come from? because thats the only way this company can be saved. The balance sheet looks unstable, advertisers would be loathe to commit and the Senior lenders will need to commit to cash flow to keep the operation running.
    There is a difference to working out a business and a tv station and one of the real interesting questions will be is how do we get viewers up and hence cash flow when there is greater demand for paid TV and internet TV. Unfortunately Nine does not appear to have a strategy for changing viewer demands, its an old model.

    Date and time
    October 10, 2012, 11:59AM
    • Totally agree @Lindsay, I would be very surprised how they can convince anyone to find the middle ground without a plan to keep the cash flowing in. They are definitely in the perfect storm with their books looking beyond recoverable and a market that is being turned up side down. Ten was in despair in the early 90s but the market was stable. They could recover once they sorted out their financial woes. I don't think 9 have the luxury. Looks like Mr Gordon will come out with a bit more spectrum to play with, but it isn't worth what it used to be (well unless you start using it for something other than TV).

      TV is Dead
      Date and time
      October 10, 2012, 12:47PM
  • Anyone who has any contractual arrangements with Nine should be dead worried that Nine will not meet its end of the bargain. For too long greedy staff have put their own interests first. The NRL should be worried it will never see a cent from Nine. If they have to renegotiate the TV rights in the next few months you wont be able to give them away.

    Date and time
    October 10, 2012, 12:50PM
    • And just when Karl Stefavonic was getting his regular "motherhood" questions down pat. Where or when will Abbott now get to host his warm and fuzzy, feel good interviews ? And poor Maggi, she just spent a fortune buying gear to match CH 9's studio decor. Early lesson Maggi, you just can't trust the media!

      Date and time
      October 10, 2012, 3:08PM

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