Australia’s Network Ten Put Into Receivership

Lachlan Murdoch - Getty - H - 2016
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Shareholders Lachlan Murdoch and Bruce Gordan and creditor CBS have been mentioned as possible players that could acquire stakes in the company.

Troubled Australian broadcaster Network Ten is now in receivership, an alternative to bankruptcy, in which a receiver is appointed to run the company.

Ten's major creditor the Commonwealth Bank appointed PPB Advisory to recoup its debt via a sale or recapitalization of Ten Network, the company confirmed to the Australian Securities Exchange on Monday.

The receiver said Ten’s other major creditors, Lachlan Murdoch, Bruce Gordon and fellow billionaire James Packer, would provide $23 million (AUS$30 million) to allow the broadcaster to continue to operate until Aug. 31.

The appointment of a receiver is the latest twist in the tale of the broadcaster of Masterchef Australia and The Bachelor franchise after its board appointed voluntary administrators on June 14. That decision followed advice from Murdoch and Gordon  who hold a 7.7 percent and 14.9 percent stake in Ten, respectively  that they would not guarantee further debt past December 2017, at which time Ten’s current $158 million credit facility comes due.

Ten had drawn down $74 million of that line of credit and was seeking another $191 million when it went into voluntary administration, with a market capitalization of just $45 million.

Murdoch and Gordon subsequently revealed on June 16 that they were working “exclusively” together to negotiate a restructuring of Ten. It is widely expected that they’ll be among the eventual bidders for Ten. However, both are currently prevented by Australia’s media ownership laws from taking stakes larger than their existing shareholdings. Australia’s parliament is currently considering a package of reforms, which includes repealing those laws, but won’t be debating rule changes before Aug. 8.

Ten administrator Mark Korda of Korda Mentha said after the network’s first creditors meeting last week that the sale process at Ten was not contingent on changes to media ownership laws, adding "that will be good for Ten and good for the sale process."

"Obviously, the industry needs media laws to change. Channel Ten is a player in that industry, it's very important, but we believe the company can be recapitalized irrespective of the change in media laws, but it would certainly make sense, on a broader scale, to put those media laws through," he said.

Murdoch and Gordon hold their stakes in Ten through their private investment company’s Illyria and Birketu. Fellow billionaire James Packer is also a Ten creditor, alongside CBS Corp., 21st Century Fox, Endemol Shine, Fremantle Media, Metroweather, Starcom and Cricket Australia.

Mentha said the administrators have already received a number of expressions of interest to purchase the network.

According to a Fairfax Media report, CBS Corp., a key program supplier and a joint venture partner with Ten in its digital channel Eleven, was considering taking a stake in Ten as part of the renegotiations of its program supply deal with the network. But that was before Ten went into administration.

“While sources close to the U.S. [company] have sought to distance it from an outright purchase of Ten, others believe it makes sense if CBS is one of the interested parties in the network's sale process as it has experience in the Australian market and can drastically reduce Ten's expenses by cutting the cost of its output deal,” the report said.

“Given it would have taken equity in Ten in exchange for an output contact reduction, industry sources believe CBS may be involved in a transaction for Ten, whether the [company] takes over the whole network or as part of a joint venture."

CBS Corp. and others didn't comment on the situation.