CVC, hedge funds exchange barbs over Nine debt
Negotiations over CVC-owned Nine Entertainment’s debt burden have descended into a war of words between the company and its hedge fund creditors. CVC stands accused of playing a “precarious game” by insisting it is under no pressure to restructure the debt while company sources say that hedge funds’ plans for a debt-for-equity swap are premature.
Apollo and Oaktree have said they will work over Christmas to develop a restructuring plan for A$2.6 billion ($2.7 billion) in debt on Nine Entertainment's books, The Australian reported. A CVC source countered that nothing can happen until the debt matures in February 2013, provided interest payments are met.
Apollo and Oaktree now hold more than A$1 billion of this debt burden following of spate of discounted purchases on the secondary market. It is estimated that hedge funds as a whole control at least 60% of the A$2.6 billion.
A key challenge for CVC is that it requires 100% lender approval to extend the life of the debt and two-thirds approval to amend covenants. Therefore, the hedge funds - whose ultimate goal is to build cut-price equity positions in Nine Entertainment - have the power block any changes.
CVC has shelved plans to restructure the debt twice in recent weeks. A proposal tabled last month for a two-and-a-half-year extension on the debt in order to give time for advertising revenues to improve was abandoned following a lukewarm response from creditors. Last week a plan to divide the debt into two categories, one allocated to banks and the other to hedge funds, with maturities extended to 2017, was also dropped.
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