U.S. Creditors to Take Control of Australia’s Nine Entertainment in Debt Restructuring

Nine Entertainment - H 2012

Apollo Global Management and Oaktree Capital will now own 95.5 percent of the company in a deal that keeps it from insolvency.

SYDNEY - Nine Entertainment, the owner of Australia’s second-ranked TV broadcaster, the Nine Network, reached an agreement for a debt-for- equity swap Wednesday with creditors led by U.S. hedge funds Apollo Global management, Oaktree Capital and Goldman Sachs.

They were owed a total of $3.2 billion.

The deal, full details of which will be worked out over the next three months, means Nine’s principal lenders will end up owning 95.5 percent of the company, while its junior or mezzanine debt holders, including Goldman Sachs, will have a 4.5 percent stake in the company, which will now be debt free. The deal values NEC at $2.3 billion – well below the $5 billion then owners CVC Asia Pacific acquired it for with cheap debt in 2006 and 2008.

It came after two days of intense negotiations - during which Nine CEO David Gyngell left to attend the birth of his first child 2am Wednesday - and warnings from Nine management that if a debt for equity arrangement could not be reached this week, Nine would be forced to default on its loans which were due in February.

In a statement Wednesday night local time Nine said full details of the restructure will be contained in schemes of arrangement  which are expected to be lodged with Australia’s; corporate regulator in late November.

The trading and operating activities of NEC’s major subsidiaries the Nine Network and Ticketek continue as normal, the company said. Customers, employees and business partners of both businesses will be unaffected by the restructure.

NEC CEO David Gyngell appeared ecstatic talking to reporters after the two days of meeting, saying that while negotiations were "tortuous … the outcome is the best imaginable result.”

“Nine's back … in a huge way with zero debt, which is the best possible news for our stakeholders - Nine's viewers, our clients, our partners and our staff,” Gyngell said.

“As I've reiterated throughout this process, Nine is a great business with terrific people and outstanding brands. This historic agreement positions us for unrivalled leadership and I cannot wait to lead the Group into an exciting 2013 and beyond,” he added.

NEC chairman Peter Bush said: "We believe this is an outstanding outcome for all stakeholders.  The business has great momentum and strong cash flow, and now it will have the strongest balance sheet in the industry. It puts the company in a remarkable position to build on the successes of 2012."

It was something of a happy coincidence that Gyngell's son was born in the midst of the crisis.. Nine is in the Gyngell’s DNA: David’s father, Bruce, was the first person to appear on Australian television and was Nine founder Kerry Packer’s chief lieutenant and introduced breakfast television to the UK in the 1980’s.  Now David Gyngell is reshaping the Nine Network in his own style and only time will tell if a third generation Gyngell takes a role at the still iconic company.