CVC-backed Nine makes new restructuring proposal
The management of Nine Entertainment, the beleaguered Australian media company owned by CVC Capital Partners, has put forward a new proposal for restructuring its A$3.8 billion ($3.9 billion) in debt. Adrian McKenzie, CVC’s Australian managing partner who resigned last month, has also been removed from the Nine board, allowing the company greater independence in negotiations with creditors.
Previous restructuring plans have been submitted by Apollo Global Management and Oaktree Capital, which control the majority of Nine's A$2.8 billion senior debt, scheduled for repayment in February 2013, and Goldman Sachs, which controls mezzanine debt funds that lent about $1 billion to the company.
According to The Australian, Nine's proposal grants senior debt holders more than 90% equity in the company, while Goldman would get a 6-7% interest. After the restructuring, Nine's debt load would fall to about A$1 billion, based on warrants using its earnings - forecast to reach A$250 million this year - as the underlying instrument.
The hedge funds want the senior debt to convert fully into equity, with Goldman receiving warrants worth 5% of the excess value generated by any future sale of Nine about A$2.8 billion. CVC would get nothing more than reimbursement for its costs in the restructuring. Goldman and CVC earlier suggested that the hedge funds receive a 70% equity stake, with 30% going to the mezzanine funds and the private equity firm getting a small portion of the latter stake.
A key area of difference is valuation of the asset. Under the Goldman proposal, Nine would retain A$1.25 billion in debt through a new five-year facility, with the leverage dropping from 10x EBITDA to around 4x. The overall package values the business at A$2.6 billion, or 10x forward EBITDA.
Oaktree and Apollo don't believe Nine is worth so much, and they also want to reduce the debt load to 1.5-2.5x EBITDA.
CVC paid A$5.3 billion for Nine Entertainment - formerly known as PBL Media - through several highly leveraged transactions between 2006 and 2008. Whatever is ultimately agreed by the creditors, the private equity firm looks certain to lose the A$1.8 billion in equity that it pumped into the business. This would be the largest ever loss on a single PE deal in Asia.
Nine has offloaded a number of non-core assets to try and pay down some of the debt, including ACP magazines and a stake in auto website Carsales.com.
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