U.S. Investment Firms Take Control of Australia’s Nine Entertainment

Nine Entertainment - H 2012

Creditors approved the company’s recapitalization plan, which allows it to avoid insolvency and may lead to an IPO within 18 months.

SYDNEY -- U.S. private equity firms Oaktree Capital and Apollo Global Management have taken control of Australia’s Nine Entertainment after the company’s creditors approved a recapitalization of the company and its $3.6 billion in debt, allowing it to avoid insolvency.

Nine’s current management team, including CEO David Gyngell, will continue to run the company.

Australian media reported that Nine’s creditors agreed to convert their debt into equity early this week. The two U.S. funds will now own a 95 percent stake in the company. Nine includes the Nine TV network, which ranks second in the country's ratings. The new owners will consider a stock market listing of Nine within 18 months, according to local reports.

Apollo and Oaktree also own entertainment assets in the U.S. Apollo, for example, controls American Idol owner Core Media Group. Oaktree has been an investor in Tribune and radio station group Cumulus Media.

Former Nine owner CVC Asia Pacific, which has lost all of its $1.8 billion investment in Nine, now controls just under 1 percent of the Australian media company. Second-tier debt holders, led by Goldman Sachs, have a 3.4 percent stake following the recapitalization.

The deal must now be approved by the Federal Court of Australia Jan. 29 before Nine’s senior debt expires on Feb. 7. The company will take on new debt of about $700 million in its recapitalization deal.

A new board of highly experienced media and business executives is expected to be appointed shortly. Names suggested in local media reports include previous federal treasurer Peter Costello, former Fox top executive David Haslingden, advertising veteran and Publicis Mojo CEO Joe Pollard and the former boss of Australia's largest independent TV producer Southern Star, Hugh Marks.

Thanks to top-rated shows such as The Voice, The Block and Underbelly, Nine was the only network last year to record gains in key audience demographics, and it won the year in the demos of 18-49 and 25- to 54-year-olds.

Analysts told Sydney's Daily Telegraph newspaper that Nine will “focus on profitability and having a good stable earnings base” ahead of a stock market listing. “I don't think they've been badly run as a network -- they had the wrong capital structure thrust upon them,” one of them said. “It was ridiculous being lumbered with that much debt.”

CVC Asia Pacific sold the magazine arm of the Nine Entertainment Co. last year to Germany’s Bauer Media group ahead of the company’s recapitalization.