Nine's $972m loss reflects a year of desperate struggle
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.
Frequently Asked Questions about this Article…
Nine reported a $972 million statutory loss largely because it recorded a $783 million write-down on the value of its media assets (mostly its broadcast licence). The company has taken more than $1.5 billion of asset impairments over the past two years, which pushed the reported loss higher even though the report says these write-downs did not change underlying trading performance.
After the result Nine’s total accumulated losses exceed $2.5 billion. The business had been carrying about $3.8 billion of debt, with roughly $3.2 billion of that remaining at the time lenders agreed to a restructure.
The article says the impairments did not affect Nine’s underlying financial performance, but the company was not generating enough cash: operating cash flow was negative by more than $17 million in the year, and provisions and interest pressures showed the business was struggling under its debt load.
Nine faced breached covenants and was expected to breach debt covenants on November 14. After weeks of tense negotiations, creditors agreed in October to swap debt for equity as part of a scheme of arrangement. The restructure documents are to be lodged with the courts to give effect to the deal.
Under the agreed deal senior lenders will end up with about a 95.5% stake in Nine and the Goldman Sachs–led mezzanine lenders (who hold about $1 billion of second-ranked debt) will receive about 4.5%. The scheme will convert existing senior and mezzanine debt to equity and/or refinance it.
Nine sold its magazine business ACP to German publisher Bauer Media for $525 million. ACP recorded a profit of $26.8 million on revenues of $662 million in the accounts cited by the report.
EBITDA fell to $238 million from $278 million the prior year. Nine paid $267.7 million of an interest bill that totalled $372.7 million last year. The company also recorded close to $60 million of provisions over the past two years related to programming costs versus expected revenue.
Nine said it expects to continue as a going concern once the restructure is effected. The company is expected to raise up to $700 million of fresh debt after the restructure, with most of the proceeds expected to be paid to the new shareholders and a smaller portion retained for working capital.
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