Lenders baulk at rescue plan for Nine
Nine owes its creditors close to $3.4 billion. A "senior lenders" agreement covering $2.24 billion of that debt will expire on February 7. According to a submission tendered in the Federal Court on Monday, "the company will almost certainly not be able to repay the total sum which falls due on that date".
The Federal Court heard that Nine had negotiated an agreement with some of its senior and subordinated beneficiaries whereby, via a scheme of arrangement, its $3.4 billion debt will be assigned to an entity called "Nine Holdings" and then waived, in consideration for new shares in Nine Holdings and cash payments.
The scheme is conditional upon Nine Holdings adopting a new constitution. If approved, the scheme will confer new legal rights upon two groups of senior beneficiaries - Oaktree Capital Management and Apollo - that will not be conferred upon the other senior beneficiaries.
That means Oaktree and Apollo will have additional legal rights to "board representation and corporate control" of Nine Holdings.
But a group of Nine's secured lenders - including GE Capital Finance, National Australia Bank and Royal Bank of Scotland - have told the Federal Court they were not involved in the negotiations.
The group opposes the proposed scheme of arrangement, saying it would grant veto power rights to Oaktree and Apollo.
In financial reports released to the corporate regulator last week, Nine confirmed its dire financial condition over the past year, which included a $783 million write-down on the value of its media assets.
Most of the write-down related to the falling value of the Nine network's broadcast licence. The company recorded asset impairments totalling more than $1.5 billion over the past two financial years.
These write-downs did not have an impact on the company's underlying financial performance, but the report shows how badly the business struggled under debt load that threatened to sink Nine.
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Some of Nine's secured lenders told the Federal Court they were not involved in the negotiations and oppose the proposed scheme of arrangement because it would grant veto-power style rights to two creditors (Oaktree Capital Management and Apollo). Those lenders say the plan would give unequal legal rights and control to Oaktree and Apollo, which they object to.
Nine owes close to $3.4 billion in total. A senior lenders' agreement covering about $2.24 billion of that debt is due to expire on February 7, and the company told the court it will almost certainly not be able to repay the sum falling due on that date.
The proposal would assign Nine's $3.4 billion debt to a new entity called "Nine Holdings," which would then have that debt waived in return for new shares in Nine Holdings and cash payments. The scheme is conditional on Nine Holdings adopting a new constitution.
Under the proposed scheme, two groups of senior beneficiaries—Oaktree Capital Management and Apollo—would receive new legal rights not granted to other senior creditors. The company said those rights would include additional legal entitlements to board representation and corporate control of Nine Holdings.
A group of Nine's secured lenders that includes GE Capital Finance, National Australia Bank and the Royal Bank of Scotland told the Federal Court they oppose the scheme. They say they were not part of the negotiations and object to the plan because it would grant veto-like control rights to Oaktree and Apollo.
In reports to the corporate regulator, Nine confirmed a dire financial condition over the past year, including a $783 million write-down on the value of its media assets—mostly linked to the falling value of the Nine network's broadcast licence—and more than $1.5 billion of asset impairments over the past two financial years.
According to the company's reports cited in the article, the write-downs did not have an impact on Nine's underlying financial performance. However, the impairments highlight how the business has struggled under a heavy debt load.
The lenders' refusal to agree to the new scheme is a serious hurdle to reducing Nine's multibillion-dollar debt. With the senior lenders' agreement covering $2.24 billion expiring on February 7 and the company saying it will almost certainly not be able to repay the sums due, the situation raises near-term refinancing and corporate-control uncertainty for investors.
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