BREAKFAST DEALS: Nine talks tough

Nine tells its lenders to get their act in gear, while the market considers Arrium's future.

Imagine if you could tell off your lenders? That’s kind of the situation that Nine Entertainment finds itself in, with mezzanine lender Goldman Sachs and senior lenders Apollo Global Management and Oaktree Capital still at odds. Meanwhile, Arrium stocks continued to rise yesterday after the consortium bid, but it was APN News & Media shares that stole the show. Elsewhere, Ausdrill is refinancing, Qantas Airways has gotten StarTrack Express away and Cochlear has a government deal in China.

Nine Entertainment, CVC Asia Pacific, Apollo Global Management, Oaktree Capital

The board of Nine Entertainment has reportedly written to its feuding lenders, saying it will consider restarting its sales process or even opt for receivership if a swift resolution is not found.

According to media reports, Nine chairman Peter Bush wrote to its major lenders Apollo Global Management and Oaktree Capital, along with mezzanine debt holder Goldman Sachs, with a few items for discussion.

Firstly, they were thanked for approving the sale of ACP Magazines for $525 million to Germany’s Bauer Media, which has slashed Nine’s senior debt to $2.2 billion.

Secondly, they were told to get their act together before Nine takes itself on the road to find a buyer, or call in the receivers.

Nine has already tried selling itself, with stories about Telstra Corporation or Hollywood mogul Harry Sloan consigned to the history books.

Unless another buyer emerges from the woodwork, Nine’s main weapon to use to bully its lenders into submission is the threat of receivership.

It’s quite a bizarre situation, isn’t it – the heavily indebted party is telling its lenders to get their act together. How would that go down on Underbelly?

As a source for one of the newspapers wisely pointed out last week, these things usually go on for as long as the deadline permits, then a little longer.

Arrium, BlueScope Steel

Arrium shares added another 5.2 per cent as the market began to factor in the likelihood of a higher bid coming from its Asian consortium suitor, along with the less likely scenario of a rival merger agreement with BlueScope Steel. Both companies are the product of BHP Billiton.

The target’s stock finished the session at 71.5 cents, with the growing expectations that Steelmaker’s Australia, a consortium led by Singapore-listed trading house Noble Group and South Korea’s POSCO, will increase its 75 cents, $1 billion bid.

The merger idea has been kicked around the market for a few years, but neither of the companies has shown much interest in merger with their only real domestic competitor.

Hence, the smart money is still on the consortium. But a bigger bid is needed to get past the board.

APN News & Media

The other share price that was on the move in a big bad way was APN News & Media, also because a deal was in the works.

APN shares shot up 25 per cent to 46 cents a pop, amid speculation that the company was close to a sale of its New Zealand media assets, which includes The New Zealand Herald.

Chief executive Brett Chenoweth put the assets up for sale in May, saying that Deutsche Bank would offer advise on a strategic review. Some unsolicited suitors had come knocking.

The sudden surge started just after 1400 AEST, with no official word coming from the company.


Mining services company Ausdrill in talks with US financiers including Deutsche Bank and Morgan Stanley about a possible "refinancing transaction”.

Ausdrill wasn’t particularly forthcoming with many other details, apart from Grant Samuel and King & Wood Mallesons acting as advisers.

The release to the market was on the back of a report in The Australian Financial Review, which has subsequently claimed that the transaction being considered is for the US corporate bond market, with the hope of raising up to $400 million.

The proposal is to refinance about $550 million in existing loans.

The news comes on the back of Nufarm’s high yield bond which sold last week, raising $US325 million in the process.

Qantas Airways, Australia Post

About a month ago we received word that Qantas Airways was poised to collect around $400 million for the sale of its 50 per cent stake in freight business Star Track Express to joint venture partner Australia Post.

Now the official word has rolled in. Qantas will collect $408 million for the sale, which Fairfax’s Malcolm Maiden points outs appears to have been in the making since May.

He writes that back in May the two companies sought to restructure their joint ventures and Australia Post chief executive Ahmed Fahour said the changes offered them a "clear path”.

To what exactly? To yesterday’s announcement.

Australia Post has forked out $430 million for the other half of StarTrack and Qantas will receive a net $408 million after giving Australia Post $22 million to make the Australian Air Express haul business a Qantas business.

Qantas chief executive Alan Joyce, sweating on the deliberations of the Australian Competition and Consumer Commission on his Emirates alliance, was keen to sell the development as a boost for Qantas’ financial position.

"This just continues to add good news to our funding position and good news for the rating agencies," Joyce said yesterday.

Cochlear Limited

Australian bionic ear maker Cochlear has reportedly secured a $100 million contract with the Chinese government and is bidding for another $600 million deal.

The Australian Financial Review reports that the contract was secured in May and was made public via a Chinese website for parents of deaf children.

The next $600 million deal that Cochlear is chasing would be over five years.

It’s an interesting angle to China’s growth that isn’t often spoken of. We hear of China’s thirst for iron ore and coal, along with agricultural products, but not it’s growing healthcare needs.

The AFR says China looks set to triple annual healthcare spending to $US1 trillion by 2020.

Wrapping up

Having spoken a few times this morning about raising capital, the unlisted Goodman Australia Industrial Fund is seeking $400 million from existing and new investors, which will extend the life of the fund.

Meanwhile, Lend Lease has agreed to jointly develop a property site in Kuala Lumpur with private Malaysian developer NAZA TTDI.

In resources, indicative bids for Kagara’s North Queensland assets will be due on October 17, according to The Australian Financial Review.

The newspaper reports that administrator Taylor Woodings has sent around the sale documents with the smell of a quick sale in the air.

Explorer Tap Oil says it could take six months to offload the Tallaganda and Zola gas sites off the coast of Western Australia.

Central Petroleum is hoping to get a second major league joint venture partner, after signing a $150 million agreement with Australian giant Santos.

And finally, you can add Harvey Norman and Momentum Energy to the list of advertisers that have walked away from 2GB’s Alan Jones.

The trouble is, unless his ratings go down – and this columnist means crash – there will be other advertisers to take their place after the heat dies down.


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