Nine debt problematic for shareholders

Nine CEO David Gyngell has talked down comments about debts that surround Nine Entertainment Co.

It follows predictions from Seven’s Kerry Stokes that Nine could be owned by banks within a year.

“It’s always sad to see a competitor in financial difficulty. And obviously they are in financial difficulty,” Stokes said after Seven Group’s annual meeting in Sydney.

Nine Entertainment, which includes Channel Nine and ACP Magazines, was bought by private equity firm CVC Asia Pacific in 2006 and has amassed some $3.66 billion of debt due to be refinanced between 2013 and 2014. Earlier this week the Australian Financial Review reported that Nine auditors warned that a deterioration in its performance during 2011-12 could force the group to pull forward a key refinancing.

Ernst & Young said there were doubts about its ability to continue as a going concern unless it was able to repay or renegotiate $975m of debt due in 2014.

Nine posted EBITDA of $400.8 million in 2010/11, according to a report of the company’s accounts in the AFR.

But Gyngell told media the company’s debt was a matter for shareholders, not management.

“Clearly, there are some shareholder challenges and shareholders are going to have to sort those challenges out,” he said.

“You don’t have to be a rocket scientist to work out Channel Nine will still be going to air in one year, two years, three years time, no matter who are the owners.

“My role will be to ensure I protect those businesses to the best of my ability.”

Nine spokesman David Hurley said: “We won’t die in a ditch over anything Kerry Stokes says. Of course he will say this – it’s all a bit of shadow boxing”.

Source: The Australian, Business Spectator, AFR, Herald Sun.

21 Comments:

  1. gerry kennedy

    Going by David Gyngell’s photo. Channel 9 is going that bad, he can’t afford a tie.
    Or is this a sign of the status of 9 ? Taking things a little too casual !

  2. And the bad news for Nine is the Hollywood studio output deals across the board are going up in price and not down as digital channels have come on air. Nine is heavily dependent on it so if its get a series of studio duds next year this will compound their problem. I’d be very worried if I was a lender. Why did these private equity guys go into television when so many media platforms are emerging? It is the most complex of businesses with very high risk.

  3. @steve sydney

    Nine are Not winning the 3 demos Seven are. Nine won’t win any demos this year. I don’t know where you get your info from but you are not right. If you are talking about the past couple of weeks then that doesn’t win you a year.

  4. $100m per year to WB, $250m interest bill (the $400m is earnings before interest), the ridiculous $500m WB “deal”.
    Nine produced far more with far less people, and of better quality, decades ago. Too many fat cats now.
    Not a concern for “management”? Not until the next WB cheque bounces, or the bank calls in advance.

  5. Armchair Analyst

    @Kaylen. i know you were havinga bit of a joke there, but i actually think it would be agood idea, although that would require the shareholders and equity firms to be so desperate to ofload the Nine Network that we and Tv Tonight would be able to afford it. I dont think that will happen, they Nine will just axe more jobs and put crap cheap shows on. Thats what Ten are doing.

  6. @Kaylen: Fantastic idea (if only it were possible!) … we could fix it in six months because we actually love TV and that is the only way to truely succeed in this business … Kerry Packer is the perfect example!

    So many, many stupid decisions they have made, so little respect for the shows and the viewers! Put the viewers first, not the advertisers or shareholders and then everyone will eventually come out winners! You do it the wrong way round!!!

    If I were a Billionaire I would buy it and fix it myself!

  7. Nine are goners in 12 months time. He keeps down playing it but the fact is Nine are a sinking ship. Sure they run second to Seven but this year they haven’t won any of those elusive demos either this year. We all knew this was coming and it keeps moving closer and closer and closer.

    Heres what i predict is going to happen. Nine won’t be able to bid on things such as the NRL, Olympics, Melbourne Cup etc because they will be bound by debt. Who wants to do a deal with a broadcaster who can’t afford to pay them? If Nine were to go under that would be a bleak day in this country but they have brought this upon themselves for years by treating their viewers with contempt.

  8. CVC Asia needs to immediately evaluate the performance of senior management at Nine. Cost cutting is not the solution. And if they won’t do it then the bankers should do it themselves. With a bit of sensible and creative management Nine’s performance could be significantly improved. Television assets are completely dependent on the calibre and creativity of management and staff, more so than other industries. The current bunch are not delivering.

  9. So Nine as a whole are on the chopping block. Bloggers on this site seem to declare the death on TEN as well… so what? We’ll only have Seven, ABC and SBS in 12 months time? Please…

    If Nine are winning all 3 demos… then why isn’t the cash flowing in? Is the ACP Magazine division on the decline?

  10. David – what are the chances of TV Tonight buying Ch9? Think if we all chip in, we could cover the cost? 😉

    I think CEO David Knox, and TV Tonight members as the Board would make an awesome TV channel…

    After all, selling price of Ch9 is sure to be cheap… 😉

  11. Here’s a thought – I just pulled this at random – why don’t Channel 9 have a go at attracting viewers? Here’s another thought – I dont want payment for this – it’s just a gift from me – why not try to keep viewers once they get them?

    I dont run a TV network, so what the hell do I know, but (and here’s another wild random thought) if Channel 9 spent some effort making the viewers’ experience better, they might be able to pick a few off the other channels.

    I’m not too sure, but I think increased viewer numbers means more revenue for the channel doesn’t it?

    Just an ignorant viewer’s thought. But what the hell do i know?

  12. It’s interesting that these comments came from the man whose own network is being squeezed financially by the new ‘miners’ on the board.

    These are the same ones who decided they could save a few bucks by cutting back on Christmas parties.

    The wheel turns!

  13. Yes but the management is also a matter for the shareholders. When the shareholders (and the bankers) realise the management are clueless as to how to turn the situation around there will be blood on the carpet. Nine are paralysed by the debt and David Gyngell should bring the inevitable ownership changes on. Get rid of the greedy equity firms who thought they could make big dollars on the way through – make them take their medicine and then maybe Nine management can get back to the business of running a broadcaster in the 21st century. Right now all they do is programme 2.5 Men. How many staff do you need to do that?

  14. Do you think 9 might sell big international shows to other networks.(ie surivior,big bang theory,2.5 men,top gear,csi(original and spin offs))
    Maybe 9 might sell NRL
    who knows what they will do to cut prices

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