Nine's $972m loss reflects a year of desperate struggle
NINE ENTERTAINMENT made a $972 million loss for the financial year ending June 30, taking its total accumulated losses to more than $2.5 billion, as the media group headed for collapse earlier this year.
In financial reports just released to the corporate regulator, Nine confirmed its dire condition over the last 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 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 its underlying financial performance but the report shows how badly the business struggled under the $3.8 billion debt load that threatened to sink Nine.
The company was not generating enough cash to pay its way, with operating cash flows negative to the tune of more than $17 million last year.
This is despite it paying only $267.7 million of an interest bill that totalled $372.7 million last year.
Debt was not the only issue. Nine Network was forced to record provisions of close to $60 million over the past two years, which relate to the difference between what it must pay for some of its programming and what it will receive in revenue against the programs.
In October, the company avoided collapse when its creditors finally agreed to swap their debt for ownership after weeks of tense negotiations.
The report, which was signed off on October 31, said the company expected to breach its debt covenants on November 14. By that stage, the lenders had agreed to the restructure and Nine had sold its magazine business, ACP, to the German publisher Bauer Media for $525 million.
The accounts show that ACP made a profit of $26.8 million on revenues of $662 million.
Documentation for the scheme of arrangement, which will give effect to Nine's restructure, is due to be lodged with the courts.
"As soon as the restructure is effected, it is expected that all existing senior and mezzanine debt will be converted to equity and/or refinanced," the company said in its financial report.
"In light of this agreement, the company expects to continue as a going concern."
Earnings before interest, tax, depreciation and amortisation (EBITDA) - the metric used for valuing the company by its lenders - were $238 million, down from $278 million the previous year.
The two classes of lenders are expected to vote on separate schemes next month.
Both classes have agreed to a deal that will convert the $3.2 billion of remaining debt into equity. Senior lenders will end up with a 95.5 per cent stake in Nine and the Goldman Sachs-led mezzanine lenders, with $1 billion of second-ranked debt, will receive 4.5 per cent.
Nine is expected to raise up to $700 million worth of fresh debt after the restructure.
Most of the money raised is expected to be paid to the new shareholders, with a smaller amount retained as working capital.