Jotters give a running commentary on the NRL broadcast rights deal, while one previews BHP Billiton's results.

Touchdown, NRL! After what seemed like an eternity of being beaten up by rival code AFL, rugby is back with a big bad cheque. Fairfax’s Roy Master’s begins the dissection of what this means for the National Rugby League. Meanwhile three other commentators address how the NRL got such a good deal when the bidders are so worn down by the advertising market.

A gleeful Roy Masters of Fairfax, who is a former coach of Wests and St George, says the deal is a big win for players, clubs and, hopefully, development.

"A potential downside is if Telstra, who paid the AFL $153 million for online rights, values the remaining mobile phone and online properties at significantly less, then the ARLC may struggle to achieve $1 billion in cash, given that the cash component of yesterday's is $925 million. Still, if Telstra, or another internet provider, pays half the money Telstra outlaid for AFL online rights, it will deliver $1 billion in cash, justifying the claim made by Nine boss David Gyngell yesterday that ‘pound for pound’, the rugby league deal is better than the AFL’s.”

Fairfax’s Malcolm Maiden explains how the ARL managed to play the networks off against each other to extract a bid larger than their current advertising takings might otherwise allow.

"Nine for its part wanted to hold on to league to avoid torpedoing the ratings bounce it has engineered this year, and to keep alive its hopes for a debt reconstruction that stabilises its balance sheet and replaces private equity group CVC with a new owner. Ten simply needs ratings. The bids by the three free-to-air networks also owed something to the way the auction was run by the commission and its advisers from Greenhill Caliburn – former Australian Competition and Consumer Commission chairman and former AFL commissioner Graeme Samuel, Roger Feletto and Peter Wilson. Word went out that the commission was prepared to auction free-to-air rights separately, if necessary. That pulled the Nine-Foxtel alliance back into the pack, by holding out the prospect that Ten and Seven could bid alone, win the rights, and then look to deal Foxtel in.”

Indeed, Nine had the greater incentive. The Australian Financial Review’s Chanticleer columnist Tony Boyd expands on the enormous debt problems faced by the network’s owner CVC Asia Pacific.

"The lenders and CVC know that without the NRL, which generates about $60 million a year in revenue, the value of Nine would plunge dramatically and diminish the chances that its $2.8 billion in senior debt will be repaid. That debt is due to be refinanced by February next year. In the meantime, a breach of covenants is expected in September and that may be a trigger for hedge fund action regarding ownership. CVC has lost more than $2 billion in equity on the Nine transaction and funds managed by Goldman Sachs stand to lose at least half of the $1 billion in mezzanine debt. Considering that context, Gyngell did well to pull off one of the biggest sporting rights deals in Australia.”

Business Spectator’s Stephen Bartholomeusz agrees, while also touching on how the looming threat posed by Nine’s lenders didn’t just spur the network on, but also shaped the structure of the NRL deal.

"The ARLC (Australian Rugby League Commission) and its advisers, Greenhill Caliburn… took comfort from Nine’s operational performance – and some insurance against the balance sheet risk (Greenhill was brought into the negotiations in May, when it appeared the ARLC was going to be disappointed with the outcome of the bidding). About $90 million of the $1.025 billion Nine and Foxtel have agreed to pay over the next five years will be paid up-front by Nine, in two instalments in December and March next year. In the unlikely event that Nine formally defaults its debts in February and for some reason can’t or won’t make good on the remainder of its obligations to the ARLC (whoever is in control of Nine would presumably want to retain the rights) the ARLC will have that $90 million in the bank and would be able to re-tender the free-to-air rights. Seven and Ten would still be keen.”

On news that’ll emerge later this afternoon, The Australian Financial Review’s resources reporter Jamie Freed previews BHP Billiton’s upcoming results, specifically the performance that chief executive Marius Kloppers will have to deliver.

"The expectation now is that the Olympic Dam expansion and outer harbour will be shelved, moves the market would like confirmation of today, lest the uncertainty over BHP’s spending profile linger. The third project, Jansen, which six months ago was viewed as the most doubtful, appears the most likely of the three to continue, albeit at a slower pace. This time around, Kloppers will need to better communicate BHP’s spending plans to the market – and based on his declining scores in the Corporate Confidence Index, it will be more important than ever to get his message out properly.”

In other company news, The Australian’s John Durie says Amcor boss Ken MacKenzie isn’t far away from revealing a string of acquisitions as the company searches for more growth opportunities. Durie also has some interesting observations about how Amcor’s largest customers are big pharma, food and tobacco companies, which are all powerful enough to look elsewhere of the packaging giants margins swell too much.

Fairfax’s Adele Ferguson noticed that Amcor’s stock actually took a small spill after the results, explaining that investors were either shifting out of defensive stocks or overlooking a healthy set of numbers because of an ill-defined outlook.

Fairfax’s Insider columnist Ian McIlwraith kind of expands on a point made by Durie yesterday that Australia’s chief executives are merely declining their bonuses, not cutting their base salaries.

Meanwhile, The Australian’s Barry Fitzgerald has a good yarn about the brilliant decision by Kidman Resources to move beyond NSW and take the Home of Bullion copper project in the Northern Territory in April. The site has been mined on and off by smaller players for years, who dreamt of turning it into something more. Kidman appears to be making this happen and its share price has almost doubled as a result.

And finally, in economic news, The Australian Financial Review’s Alan Mitchell relays the concerns raised for the Reserve Bank of Australia’s annual conference about the property market.

The most pressing is that the commercial property industry becomes more vulnerable to defaults in a slumping market and the Australian market is terribly reliant on China.


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