NINE Entertainment's lenders are expected to take ownership of the media group early next year, but they will not have to wait for a turnaround before cashing in. A deal has been struck that will deliver hundreds of millions in cash to the broadcaster's debt holders as soon as they take possession of the company.
Final terms of the deal are still under wraps but it is understood Nine's lenders reverted to a structure where they will be given an equity stake in Nine and all current debt will be cancelled.
Fresh loans of up to $700 million will be raised, most of which will be paid out to these lenders. The remainder will be available to Nine management as working capital.
When the deal was originally brokered in October, after weeks of tense negotiations that threatened to send Nine into administration, its chief executive, David Gyngell, and chairman Peter Bush crowed about having a debt-free balance sheet.
''The business has great momentum and strong cash flow, and now it will have the strongest balance sheet in the industry. It puts the company in a remarkable position to build on the successes of 2012,'' Mr Bush said in a statement.
Nine did not return calls on Friday.
The cash return will add to the bonanza for hedge funds, Apollo Global Management and Oaktree Capital, which acquired $1 billion of Nine's senior debt at a significant discount to its face value and will effectively control Nine.
A group of Nine's original senior lenders, who were agitating to have their debt rolled over at par value, have continued to sell their debt rather than end up with equity in the business.
About 4 per cent of the senior debt is still in the hands of these lenders.
Documentation for the scheme of arrangement has been handed to the Australian Securities and Investments Commission and will be lodged with the Federal Court within two weeks. It is then expected to go back to the two classes of lenders, who will vote on separate schemes in January.
Both classes of lenders have agreed to a deal that will convert the $3.2 billion debt that threatened to sink the media group into equity. Senior lenders will end up with a 95.5 per cent stake in Nine, and the Goldman Sachs-led mezzanine lenders, who faced losing the $1 billion they had invested in second-ranked debt, will receive 4.5 per cent.
Goldman Sachs' support was needed because the deed of company arrangement that will bring the debt-for-equity swap into effect needs the separate approval of all classes of stakeholders.
This includes Nine's current owner, CVC, which will lose most of the $2 billion it invested.