Talks continue on the future of Nine
Nine lenders have approved the sale of ACP Magazines but are still facing a looming deadline to avoid bankruptcy.
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Talks concerning the future of Nine Entertainment Co. are continuing in Sydney this week with Nine’s private equity owners looking to restructure nearly $4 billion worth of debt.
The worst case scenario could ultimately lead to bankruptcy for Nine, but observers note it isn’t in anybody’s interests for that to occur.
Nine’s chairman Peter Bush and chief executive David Gyngell are understood to have hosted two days of talks in Sydney.
Last night lenders approved Nine’s sale of ACP magazines to Germany’s Bauer Media group, believed to be around $525m. The deal still needs the approval of the Foreign Investment Board.
”It’s one box ticked on a very long list before this is all resolved,” a source told Fairfax. ”This was a bit of a formality, but at least we are heading down the right path.”
Private equity firm CVC Asia Pacific, which paid James Packer $1.46 billion cash for the company and took on $3.6 billion in debt has since lost the $2 billion it injected into Nine. It is attempting to push out its debt repayments among its financiers, who are mostly made up of hedge funds.
CVC must repay $2.8 billion of debt by February and a further $1 billion a year later, but a breach of its quarterly debt covenants could trigger immediate payment of all the debt, according to Nine’s financial accounts. CVC managing partner Adrian MacKenzie quit last week after 17 years with the company.
Goldman Sachs manages $1.1bn of debt and the US distressed debt funds Apollo and Oaktree holds more than $1bn of senior debt.
The Australian Financial Review reports Goldman has argued that the sale of the magazines business makes Nine a more attractive and valuable proposition and therefore it deserves a 30 per cent stake in the new Nine.
Sources close to the talks told The Australian that the talks were “progressive” but both parties were no closer to saving Nine from bankruptcy.
Sending Nine Entertainment into receivership would put at risk vital sports contracts including the record $1.1 billion deal with the NRL.
Thankfully for Nine it has a more buoyant outlook as a broadcaster in 2012 than it did twelve months ago. The Voice, The Block, Big Brother, Howzat have all performed well and the network is likely to win the year in the key demos. However the February refinancing deadline is also an awkward time given it is the start of a new television year and optimism is crucial.
If Nine does enter bankruptcy it wouldn’t be the first time an Australian network has hit such lows. Nor would it mean the network suddenly ceases to broadcast.
In 1990, both Network TEN and the Seven Network filed for receivership. TEN was eventually sold to Canwest in Canada. Seven’s woes were tied to the Christopher Skase-led Qintex group making a failed $1.5b bid for MGM Studios.
Source: The Age, The Australian, Australian Financial Review, Daily Telegraph
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34 Responses
OK a lot of folks are either missing whats going on here or misunderstanding it. This is about refinancing the larger companies debt, putting it back on a path to strong profitability and eventually selling it off to get a return on the capital employed. So selling off assets and cutting costs are all part of the game. Some companies just go bust and the scraps are either sold off or the business just closes down. This has affected many retailers recently. Nines biggest assets by value have traditionall been its broadcast channels, but the value of these are diminishing in a rapidly changing and evolving landscape. I am sure it will get resolved, but no tv based company is too big to go bust….
Just a last thought..Gem and Go rate lower than Sbs which relies on a substantial government subsidy to survive..so can we assume they each contribute negative cash flow to Nine Entertainment?
Wouldn’t it be akin to paying 1.46 bill for a house and assuming a 3.46 bill mortgage?..in 2007…then the Gfc hits in 2008.So advertising revenue plummets..pushing the analogy further..like taking a big pay cut on your job..making it impossible to pay down debt/mortgage.And at the same time the Fta guys add these digital additions..Gem, Go…building additions onto the house draining more money…ok i’ll quit with the house analogy..lol..but maybe you get my point. Nine, Gem and Go are worth more as functioning enterprises,rather than a mere auction of a bunch of tv cameras,mics and studios…so they’ll still be around under some changed financial matrix. You just wonder if these components are worth more together,or if there might be more selling off of individual assets like what was done with the magazine division.
To jonasboi#
Well face it this way.. I got quite angry about ch9 the reason for a fact as i have already stated earlier that ch9 keeps repeating (all new) this and all new that programe. Since when have they settle down? its always new every month of the year ? good stuff but not very smart if they are costing quite alot of money for everything they buy. Unless underbelly badness is made from ch9 itself or who knows. Seriously Why have big brother now when they now there is going to have all new this and all enw that ? shoving everything in it can not fit in everything at ones. I will write a letter to ACA and tell them how angry i am. Because i as a BB fan want the show not to be interupted by stupidity sports and such. Thats why there is at least 8 or so sports channel on foxtel to shove it all sports in it. Many thanks.
Vos: “New this and new that” is called Television. Move on.
Going.. going.. gone.
big brother is boring, the block was shit. they ditched Kerri-Anne for two morons. the network is a joke, underbelly: badness… badness? seriously. free to air tv stinks along with pretty much all the australian drama. to many ads.
Thank god Nine Perth isn’t in debt as good Ole Bruce owns the STW-9. Just buy the network Bruce and do a “full relaunch”
@bettestreep2008: Not just what it means for Ten, but what it means for the industry as a whole, esp. when it comes to borrowing money.
The only buyer that can rescue Nine IMO is Win Television (because Win-owned Perth/Adelaide need to be linked with the east coast network through common ownership, like 7’s and 10’s stations in those markets are, and Win could also be concerned about it’s regional network’s viability if a potential new owner reviews their affiliation agreement): but is prevented from doing so due to audience reach rules, which would force them to sell their regional network.
People, remember this is about Nine Entertainment, not the Nine Network.
On the NRL rights, their share of the $1b rights (remember the agreement is with Nine and Fox) is not paid immediately, but rather over the course of the contract.
HardcorePrawn, 2006/7 was a different time to 2010.
joey obviously should be nowhere near controlling Nine with uneducated remarks like that.
David, it’s the internet! You get random people with varying degrees of knowledge on the subject matter.
bettestreep, we all knew the day was coming when this would have to be resolved. Anyone thinking it was all going to magically coming flowing like champagne at the Logies was obviously on some very serious shit at the time. But again, it was a different time. As for relating Nine with Ten, they are different businesses. It’s not linear.
Hi David the cricket rights must be right up their isn’t it coming up very soon this will be very interesting for Cricket as they have just bought the NRL rights what do you think David
I have to confess I never thought it would be Nine that would be on the verge of bankruptcy.
If a network that has had blockbuster shows like The Voice, The Block, Howzat and the Olympics can be in financial strife – what does that mean for Ten?
The cost of the many failures over there would suggest that they’d be verging on bankruptcy as well – right?
Buzz3 I have no idea how the AFL Footy Show being shown live across Australia will solve 9’s debt problems. Especially seeing AFL rates less than half what the NRL Footy Show rates in Sydney and Brisbane.
Fox pay most of the NRL rights. 9 pay about $90 million a year for five years.
Where to start with some of these responses, people…..
What on earth is going on with ch9 as of late? too much new this and that and too much over spending on same old promos which is then no wonder why they keep repeating over and over the promos every 6minutos during add breaks.
The more new stuff they put on ch9 the money just keeps droping down like a cash register going bankrupt. Seriously ch9 should stop promoting so much new programes. before Big brother show started weeks before it began.. Channel 9 ends up saying all new this and all new that. Then during BB show always new this and new series and new programes. Where on earth they getting all this money? Ch9 is going bankrupt… they could shove all the (new) programes at random time of the 12month of the calender. Dont just shove the whole lot of everything in just within a month. But thats what it sounds like. When you hear new underbelly… new dallas… new the block… new this and new that. You have to think channel 9 is not normal. Its because they don’t understand what they are about to get….. when that happens ch9 will be bankrupt in which all hosts making a programe on ch9 will not bother working because the wagdes not good enough paid.
Bankrupt the network and start again. this would be a great time for 9 to get rid of some “dead wood” at the network. start at the top with Gyngell and work their way down to Eddie. NRL TV rights should be on sold to the 10 and 7 network so we can get 4 FTA games per year. please bring it on!
Bankruptcy for 9 would be the best thing for league fans in Australia.
@buzz3 – While i agree the NRL footy show should be axed, Nine wont run the AFL footy show nationally. Ratings arent the only reason!
@HardcorePawn – I agree with you that Nine was over valued, you are forgetting the other businesses that make up Nine Entertainment Co.
While TV is its main asset, it includes (for the time being at least) ACP, Ticketek, Ninemsn (50%), allphones arena, NBN(tv) and part of Sky News amongst other things. All of these businesses contribute to the bottom line and the overall value of the business.
Wonder what this will men for the Cricket TV rights which are coming up
You can tell maths isn’t my strong point, it’s nearer 9 times less isn’t it?
“CVC Asia Pacific, which paid James Packer $1.46 billion cash for the company and took on $3.6 billion in debt has since lost the $2 billion it injected into Nine”
Did CVC not do any due diligence beforehand? That is an obscene amount of money to plough into a TV network serving a country of only 22 million. What were they thinking?
As a comparison, the UK’s Channel 5 – a TV station with a similar line-up to Nine (BB, cricket, CSI), albeit with larger viewing figures (CSI gets about 2 million) but a smaller market share – was sold in 2010 for £103.5 million (approx $160m), by my calculations that’s 6 times less than the $1.46b CVC paid for Nine.
I think nine trying to get something done with the debt situation has more to do with the cricket rights where I think Cricket Australia are more likely to sign with seven if nine cannot get their house in order. Seven will win total viewers, and advertising revenue for the year, nine will win demos. Half way of the year seven increased its advertising revenue share from last year while nine even having just aired the block and the voice lost market share from advertising revenue. Nine continually repeating Super Nanny, Gordon Ramsey Hell’s Kitchen, Two and a Half Men and Big Bang Theory has hurt its brand with advertisers over the years. Demos are not the be all and end all that some people think. At the end of the day if you make the most money from advertising revenue you have won the ratings whether that’s through demos, total viewers, high rating shows, or doing well in Sydney or Melbourne.There is not a set formula.
Channel 9 must axe The NRL Footy Show for the last 2 to 3 years it has rated extremely poorly.The only reason why is still runs is because The AFL Footy Show rates strongly.AFL Footy Show needs to be shown Live right across Australia.The ratings would not be any worse in other states than what they are now
Firstly, Nine isnt liable for the entire $1.1b contract with the NRL. That is shared by Foxtel and their respective stakeholders. As a result, the cost is lower than outlined.
That said, in a worse case scenario, Nine could possibly sell off their FTA games to another broadcaster.
It will be interesting to see how this all plays out. There is some suggestion that Telstra is waiting in the wings to purchase Nine. Telstra are looking at content ownership as a way to differentiate themselves in a NBN world. Owning the Nine catalogue of local at imported programs could be an important tentpole to that strategy.
Should the Nine situation turn into crap, Telstra could concievably swoop in and pick up the scraps. They wouldnt have to content with the foreign investment review board, nor any real scrutiny from the ACCC as its a market that Telstra arent really involved in other than Foxtel.
Probably goes to show that the TV networks are paying too much for the greedy sports codes.
I believe the 1 billion is half shared with Foxtel over a period of 4-5 years. NRL is an important sporting tentpole for Nine as it’s a guaranteed audience. Without it, they might end up where TEN is now.
If Nine goes broke, how do they come up with $1.025 billion in the new NRL broadcast rights deal to pay the league? How does that work out? And who pays the NRL?
How on earth can it bid $1 billion for the NRL if it’s $4 billion in debt? I do not understand that. If Nine went bust it wouldn’t be the worse thing in the world. Useless network.