HIT Entertainment renegotiates $470 mil debt

After facing a soft breach in its loan covenants

LONDON -- Kids programming group HIT Entertainment is in the process of renegotiating its $470 million debt with banks after facing a "soft" breach in its loan covenants, sources said Monday.

HIT, the private equity company-backed venture behind such global franchises as "Thomas The Tank Engine" and "Bob The Builder," has struggled with the downturn in the U.S. DVD market.

It has seen fewer opportunities to launch new fare as an independent producer in a children's market increasingly dominated by specialist networks, and, as it enters the last two-and-a-half years of its loan agreements it faces more demanding financial targets.

The company was acquired by Apax Partners in 2005 and is backed by a syndicate of about 40 U.S. institutions who acquired the debt when the company was privatized.

A possible solution could be for a new set of covenants to be negotiated on the debt, which would see the interest rates on the debt will go up and the banks take higher fees.

The company behind a slew of pre-school brands still remains profitable and continues to pay interest on its loans.

HIT, which is chaired by former BBC director general Greg Dyke, is working with restructuring specialist Steven Hannan at Evercore Partners to renegotiate new terms with the banking syndicate.
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