- Apollo, Oaktree among creditor group
- Loss for CVC could be largest ever in Asia
- Broadcaster poised to breach agreement
Goldman Sachs and private equity firm CVC Capital Partners Ltd have proposed a debt-for-equity swap for CVC’s Australian television network Nine, two sources told sister news service Reuters, a deal that would wipe out CVC’s equity and pass control to its lenders.
If approved, the deal would see Nine Entertainment Co Pty Ltd, which owns top-rated TV network Channel Nine, fall into the hands of the lenders it owes A$2.7 billion ($2.8 billion), including Apollo Global Management and Oaktree Capital Group. Funds managed by Goldman Sachs own A$975 million in mezzanine debt, which is due to be repaid in 2014.
A deal would also crystallise a A$1.8 billion loss on CVC’s original equity investment—the largest ever loss on a single buyout deal in Asia. CVC paid A$5.3 billion in cash and debt for Nine in two deals during at the peak of the buyout boom in 2006-2008, overloading on cheap debt just before the financial crisis hit. Since then, advertising revenues have collapsed across the media sector, slashing profits at Nine and rival TV networks.
Nine has opened its books to its lenders, in a bid to kickstart restructuring talks before a February repayment deadline.
“A debt-for-equity swap is what they are proposing, which would lead to a new capital structure,” said one source with direct knowledge of the matter, who spoke on condition of anonymity because the person was not authorized to talk publicly on the matter. Under the plan, the senior lenders would end up with 70 percent equity in Nine, with the remaining 30 percent held by Goldman Sachs, the source said.
The proposal, which was put to Nine’s board and senior lenders at the weekend, would give Nine a valuation of A$2.6 billion or about 10x forward earnings. A second person familiar with the situation said it was hoped an agreement could be reached by mid-November.
Nine is expected to breach an important loan agreement at the end of the September quarter, which could add to tension in what are expected to be lengthy negotiations. About 80 percent of the senior debt is in the hands of rival private equity firms and hedge funds, which bought the debt from original bank lenders on the secondary market.
Apollo and Oaktree own about A$1 billion of the debt and hedge funds including Och-Ziff Capital Management another A$1 billion.
Nine Entertainment, one of the biggest private equity-owned companies in Australia, has assets including ticketing agency Ticketek and a 50 percent stake in online site ninemsn.com, as well as Channel Nine TV.
CVC and Goldman Sachs declined to comment.
(Victoria Thieberger is a correspondent for Reuters in Melbourne.)