Channel Nine in financial trouble
Peter Lloyd reported this story on
Friday, November 18, 2011 12:26:10
PETER CAVE: It's crunch time for the owners of Channel Nine. They are meeting bankers today to ask for more time to pay off debts of more than $2.7 billion.
Analysts predict they'll get short shrift, which means the company is one step closer to a crisis not seen since the days when entrepreneur Alan Bond took Nine to the brink of financial ruin.
Peter Lloyd reports.
PETER LLOYD: Channel Nine offers a lot of sizzle.
(Television promotion for Channel Nine)
PETER LLOYD: But the business is in trouble. Debt total $3.66 billion dollars. Deja vu? Think back to the early 1990s, says shareholder activist Stephen Mayne.
STEPEHEN MAYNE: Yeah, in the early 1990s all three networks were owned by the banks and then obviously ultimately Channel Seven was floated by the banks and then Kerry Stokes did a share market raid and got control.
Channel Nine was bought back by Kerry Packer who paid in the end something around sort of a $800 million to $900 million to buy back Channel Nine from the banks and equally at Channel Ten Malcolm Turnbull was the advisor.
It was bought by the Canadians, Izzy Asper in 1992 and then ultimately floated and he made more than a billion dollars on that investment. So these things come and go and ultimately they are profitable businesses. Sometimes the owners get into trouble because they borrow too much money.
PETER LLOYD: That, in hindsight, seems to be the problem besetting Channel Nine.
A few weeks ago the rival media owner, Channel Seven's Kerry Stokes, was predicting that within a year the business would be owned by the banks.
Media analyst Roger Coleman from CCZ Equities says there have simply been too many lean years in the business cycle for the owners of Nine, CVC Entertainment Group.
ROGER COLEMAN: It is essentially CVC who have got to cop it. There is no other way out other than to refloat and regear it. Bear, without being able to bludge off anybody else's balance sheet.
PETER LLOYD: Nine is looking to get the lenders to give it more time to pay off debt today. Is that likely to happen?
ROGER COLEMAN: Well, no. It's 20/13 is debt due date but you would normally try and get things done beforehand. Now with the increasing economic uncertainty, you want to bed things down pretty fast.
Now you rule the mechanics of Nine, it earned last year $415 million (inaudible) supporting $3.6 billion worth of debt. They have got one what you call unrelated asset they can still sell, Ticketek and a very small Acer Arena one in Sydney but Nine MSN is central of the group so you just can't separate that.
So the magazine, the portal and the television stations essentially have to stay together, right.
Now the bankers have got to work out what the value is if they try and float it on the market which is one choice and on our assessment using an interest cover of four times, they are going to get no equity back and the lenders have to take a 10 per cent haircut.
PETER LLOYD: So did Nine's backers pay too much at the outset or are they just badly managed?
ROGER COLEMAN: No, 2006 was a good year. 2007 leftover good year then we had the GFC. We've a one year recovery and since then media stocks have headed south.
PETER LLOYD: In general, the media business is suffering lately. Revenues are weak, the internet is gobbling up ads, content and customers.
Stephen Mayne again.
STEPHEN MAYNE: Fairfax shares have fallen from more than $5 to less than $1 because the value of their newspapers have gone through the floor. News Limited is trying to cut 15 to 20 per cent from its cost base on newspapers in Australia.
So anything which is printed around the world has been smashed by the internet as advertising moves online and circulation and sales fall but clearly there is just too much debt sitting on the PBL Media's books so CBC, the private equity owners, probably will lose control.
Banks will take over and they may and try and float the business, break it up, sell it off to try and recover as much of their $3.7 billion in debt as possible.
PETER CAVE: Stephen Mayne, the shareholder activist, ending that report by Peter Lloyd.
http://www.abc.net.au/worldtoday/content/2011/s3370129.htm
Oh great that's all we need. The AFL joining forces with some other equity partner/partners and buying out channel nine. Fu*king bloody wonderful.
