ATTEMPTS by Nine Entertainment Group to reduce its multibillion-dollar debt have hit a serious hurdle after some of its creditors refused on Monday to agree to a new scheme of arrangement.
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.