Nine Entertainment’s creditors draw up plan to push out CVC
Creditors of Australia’s Nine Entertainment have put together a proposal to convert their debt to equity which would wipe out the majority of current owner CVC Capital Partners’ interest in the firm. Hedge funds Oaktree Capital and Apollo Global Management are behind the plan, but Nine’s board has refused to meet them.
Oaktree and Apollo hold A$1 billion or about 37% of the A$2.6 billion ($2.7 billion) in senior debt owed by Nine, which is due to mature in February 2013, Reuters reported.
Following a purchases on the secondary market, hedge funds are thought to control 50-60% of the debt, giving them the power to veto any plan to extend the maturity of the bonds. CVC needs 100% lender approval to extend the life of the debt and a two-thirds vote to amend covenants.
CVC has shelved plans to restructure the debt twice toward the end of 2011. A proposal tabled in November 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. A subsequent 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.
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.
Nine is the highest-profile example of the "loan to own" phenomenon, whereby investors buy up companies' debt on the secondary market and negotiate with the boards to secure what are in effect controlling positions.
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