BREAKFAST DEALS: Nine's 11th hour

Time is running out for Nine's lenders to reach an agreement on its debt, Ten Network hits a snag on the EYE Corp sale.

Nine Entertainment will try one last time to change the channel from the static that’s summed up the mood between its feuding lenders, before seriously contemplating handing the TV over to receivers. The news comes as rival Ten Network hits some unexpected trouble with its EYE Corp sale, which looked as good as in the bag. Meanwhile, Billabong International faces a new future without a suitor, Echo Entertainment chairman John O’Neill is lining up his opponent in Crown billionaire James Packer and Nathan Tinkler has received a dose of good and bad news.

Nine Entertainment, Goldman Sachs, Apollo Global Management, Oaktree Capital

End of business today (Monday) is the deadline that Nine Entertainment appears to have set for its warring lenders to come to an agreement before it seriously considers receivership.

Media reports indicate that Nine chairman Peter Bush and chief executive David Gyngell are now seriously fed up with the feud between its senior lenders led by US hedge funds Apollo Global Management and Oaktree Capital and its mezzanine lender Goldman Sachs.

The potential for Nine to buckle under its $2.2 billion senior debt comes down to a $70 million difference of opinion.

That’s the gap between the proposal that Nine put to the lenders that Goldman Sachs agreed to, where the investment bank would receive equity and warrants worth a total of about $150 million, and the counter-proposal put by Apollo and Oaktree.

After bolting from its initial request for a 30 per cent equity stake, Goldman has dug in at $150 million and doesn’t want to budge.

As The Australian Financial Review's Nabila Ahmed – who's clearly been the leading journalist on this running story – points out this morning, anything that Goldman gets should be considered a win. There just isn't enough confidence in valuations for Nine that are greater than its senior debt.

Whatever the case, someone is going to have to move, or else the company could be put in the hand of receivers, where Gyngell would be inclined to walk. No one at the table wants any of this.

In fact, that’s the argument that all three sides are using to encourage a deal. It feels like a doctrine of mutually assured destruction and this is Nine's Cuban missile crisis.

While we’re on the idiot box, Ten Network Holdings has apparently run into some trouble in its sale of outdoor adversiting business EYE Corp to CHAMP Private Equity.

Three months ago, Ten said that it had reached an agreement to offload the business to CHAMP for up to $145 million, made up of $120 million in coin and additional payments of up to $25 million to be paid over three years.

The Australian Financial Review understands that CHAMP has raised some concerns about the numbers that EYE Corp is racking up and the final figure could be lower than anticipated.

Billabong International

While Nine is attempting to secure its destiny today, Billabong International has been handed one by default – its last suitor TPG Capital is gone.

On Friday, Billabong announced to the market what many had been expecting. The private equity group has walked away from its non-binding $695 million takeover offer after conducting its due diligence.

The surfwear retailer believes it has a good future ahead of it as a "leading” independent surfwear wholesaler and retailer. At the moment, the company has a market cap of just $397 million.

TPG's departure means that former Just Group chairman Ian Pollard will indeed take the chair with the departure of Ted Kunkel. Pollard, whose appointment was announced just last week, was only ever going to apply if the TPG bid fell through.

In hindsight, the timing of the announcement just days before TPG pulled its offer, was telling.

The worst fears that first emerged when Bain Capital similarly walked away from a $1.45 proposal in late September were confirmed on Friday, sending the share price down 17 per cent to 83.5 cents.

Institutional shareholders Perennial and Colonial had indicated to the bidders that they wanted out, further cruelling Billabong’s position when TPG walked away.

As Business Spectator’s Cliona O’Dowd explained on Friday as Billabong’s share price was hurtling downwards, the problem for the company is uncertainty.

The market simply doesn’t know what value to ascribe to Billabong, having watched two suitors get intimate looks at the company’s numbers that shareholders are not privy to, only to walk away.

They obviously saw a problem, perhaps several. Billabong chief executive Laura Inman said TPG didn’t give any indication as to what their issue/issues were and the private equiteers were similarly quiet.

If Billabong genuinely doesn’t know why TPG walked away, they should demand the reason from their former suitors. Unless investors can understand why TPG and Bain bolted, it'll take a long time for confidence to be restored.

And given Inman’s comments on Friday that TPG had found her staff to be very helpful during due diligence, it’s the least the private equity company could do.

Echo Entertainment, Crown

Echo Entertainment chairman John O’Neill may have given up his post as the boss of Australian Rugby Union, but in doing so he’s settled in his position of fly half against the line of billionaire James Packer.

Speaking to The Australian Financial Review, O’Neill concedes that recent problems with the board and management haven’t helped perceptions of the company on the back of a period of PR stuff-ups.

Former casino manager Sid Vaikunta was sacked in disgrace earlier this year. This was followed by the ousting of O’Neill’s predecessor John Story after a bitter campaign from Packer, then the departure of long-time director Brett Paton and chief executive Larry Mullins.

"Right at the top of my priority list is no more stumbles,” O’Neill told the AFR. "We’re a regulated industry, we’ve got to make sure that risk and compliance are at the top of the agenda, and not have any behaviour or errors of judgement that provide the regulator or government or other interested parties a free kick.”

Fortescue Metals Group

The mood around Fortescue Metals Group has changed radically. Just recently pilloried by the market for having too much debt to service with the iron ore price easing, Andrew Forrest’s company has increased the size of its subsequent debt facility.

In an announcement to the ASX late last week, Fortescue said that the initial offering of $US4.5 billion to refinance its existing debt facility and pay off the Leucadia Notes of $US615 million has been increased to $US5.0 billion thanks to "strong demand and attractive terms”.

The market is now all too willing to leverage Fortescue further, which is mixture of confidence the amount of time that Fortescue has bought itself and the outlook of the iron ore price.

Wrapping up

No sooner does coal tycoon Nathan Tinkler get a bit of good news, some more bad stuff pops up.

Tinkler managed to settle a dispute with mining contractor Sedgman over a $2 million debt. Sedgman wanted to wind up Tinkler Group Holdings, Hunter Ports and Bolkm, all companies of the Newcastle Knights owner. Thankfully that’s been avoided.

However, The Australian Financial Review claims that it has received word from employees of the Tinkler Group that superannuation payments haven’t been made for more than a year.

While it might have appeared certain that APA Group had secured fellow gas pipeline investors weeks ago, it was only on Friday that the target formally accepted its $1.4 billion offer.

In a statement to the ASX, HDF said it considered the proposal unconditional and expects the offer to close on October 25.

Meanwhile, administrator McGrathNicol says the sale of Australia’s largest cotton farm, Cubbie Station, has been finalised.

Under the terms of the deal, textile company Shandong Ruyi, which is made up of investors from China and Japan, will take an initial 80 per cent stake in the farm. This will be reduced to 51 per cent within three years.

Elsewhere, construction group Leighton Holdings has bagged a $US74 million ($74.5 million) contract via its Middle Eastern joint venture Habtoor Leighton Group, to build the first proton cancer therapy centre in Saudi Arabia.

And finally, the sales pitch that Qantas Airways is employing to persuade Australia that an alliance with Emirates is in the long-term national interest has received some positive and negative news, neither of which are particularly likely to impact the outcome.

The good was news from British Airways that it will continue to service the kangaroo route despite losing its alliance partner – Qantas. A previous statement to the competition regulator had indicated otherwise, which would reduce competition on the iconic route.

However, Emirates was fined $10 million for its role in a global air-freight cartel, with the Australian Competition and Consumed Commission (ACCC) chairman Rod Sims saying it sent a "strong message” to industries contemplating such practices.

For the record, Qantas has also been fined.

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