Nine Entertainment’s prospects of avoiding receivership have received a boost after a group of debt holders led by Goldman Sachs agreed to a debt restructuring proposal.
The proposal, put forward by Nine chairman Peter Bush and chief executive David Gyngell in a bid to keep the debt-laden media company out of administration, would covert some of the debt into an equity stake.
Goldman on Wednesday said it would come away with a 7.5 per cent stake in Nine and warrants – a form of futures contract – worth a percentage of the profits from any sale of Nine in the future.
“Goldman Sachs Mezzanine Partners understands the importance of keeping this iconic Australian broadcaster out of administration and is supporting the Nine board and management,” Goldman Sachs said in a statement on Wednesday.
“Therefore Goldman Sachs Mezzanine Partners has agreed to endorse Nine’s proposal.”
Entering administration would likely prove distracting for Nine ahead of negotiations over advertising rates and programming deals for the year ahead and with the broadcast rights to the Australian domestic cricket season up for grabs.
Nine is 99.3 per cent owned by private equity firm CVC Asia Pacific.
The company’s assets included the Nine television network in Sydney, Melbourne and Brisbane, ticketing agency Ticketek and a half stake in the NineMSN website.
It recently sold publishing business ACP Magazines for a reported $525 million to German-based Bauer Media Group, and part of the proceeds were used to pay down debt.
Nine was bought by CVC in 2006 and currently holds about $3.3 billion of debt due to be refinanced between now and 2014.
The first tranche, some $2.3 billion of senior debt held by hedge funds such as Apollo Capital and Oaktree Global Management, is due to be refinanced by February 2013.
Mezzanine debt holders, led by Goldman Sachs, held about $1 billion, due in 2014.
The hedge funds were pressing to swap their debt for equity in the company.
Goldman had proposed converting its debt into a 30 per cent equity stake under a restructured Nine, a move the hedge funds were opposed to, before accepting Nine’s offer on Wednesday.
Under the agreement between Goldman and Nine reached on Wednesday, the hedge funds would emerge with 92.5 per cent of the company.
The fate of Nine now rests in the hands of these hedge funds, with Nine chief executive David Gyngell hoping for a resolution to the impasse between mezzanine and senior debt holders resolved and a deal done by October 15.
Nine’s debt would be reduced to about $1 billion under the proposal agreed by Goldman.
