CVC-backed Nine avoids receivership as lenders reach agreement
Lenders to CVC Capital Partners-backed Nine Entertainment, the beleaguered Australian TV network, have reached an agreement to save the company from being put into administration.
According to The Australian, US hedge funds Apollo Global Management and Oaktree Capital, the biggest holders of the firm's A$2.3 billion ($2.4 billion) in senior debt, conceded extra ground and gave mezzanine lenders a 4.5% equity stake in the restructured Nine.
The mezzanine tranche amounts to A$1 billion and is held by Goldman Sachs-run debt funds. Apollo and Oaktree offered 2% plus warrants worth 10% of the excess generated by any future sale of Nine above the value of the A$2.3 billion senior debt. They later changed it to a 4% equity stake only. Goldman wanted a 7.5% equity stake plus warrants worth 12.5%.
The Financial Times had reported that Goldman was prepared to accept a lower equity stake but refused to compromise on the warrants.
These positions were already a significant compromise on the original packages proposed by the creditors and by Nine management. It is also reported that, under the final agreement, Nine will be debt-free. Previous proposals wanted to retain some debt, albeit at a far lower leverage level than at present.
With Nine's senior debt due to mature in February, had the lenders failed to reach an agreement the company's directors would have been forced to appoint administrators.
Regardless of the outcome, CVC's A$1.8 billion of equity in the company was always going to be wiped out, representing the the largest-ever loss on a single private-equity deal in Asia and one of the biggest globally. CVC paid A$5.3 billion for Nine - formerly known as PBL Media - through several highly leveraged transactions between 2006 and 2008.
Adrian McKenzie, CVC's Australian managing partner who resigned last month, was removed from the Nine board last week, allowing the company greater independence in negotiations with creditors.
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