CVC rebuffs hedge fund plan to restructure Nine debt - sources

MELBOURNE Mon Feb 27, 2012 5:10am GMT

Related Topics

Quotes

   

MELBOURNE (Reuters) - Private equity firm CVC CVC.UL, facing heavy potential losses on its debt-laden Australian TV network Nine, has no plans to respond to a fresh proposal from hedge funds to convert their debt into equity, sources said on Monday.

The London-based buyout firm could face a potential equity loss on paper of as much as $2.2 billion (1.3 billion pound) and is fending off hedge funds that are trying to take control of Nine Entertainment, which is labouring under a debt load of $2.9 billion.

The hedge funds, Oaktree Capital and Apollo Global Management (APO.N), put their restructuring proposal to CVC on Friday and requested a meeting with the buyout firm, two people with knowledge of the situation said.

"CVC has no plans to meet with Apollo and Oaktree as a result of the letter," one of the sources said. The two sources were speaking on condition of anonymity because the matter is confidential.

This is the first time the hedge funds have put their restructuring proposal in writing to Nine's owners. They last sought a meeting in January and were turned down.

CVC Capital Partners bought Nine for A$5.3 billion in cash and debt from media baron James Packer from 2006 to 2008, at the height of the equities bull market, but advertising revenues have since fallen as the Australian economy weakened.

Nine, which made a loss of A$428 million last financial year, is forecast to post earnings before interest, tax, depreciation and amortisation of A$400 million this financial year, bankers have said.

Hedge funds have been accumulating their stakes in Nine's debt for over a year, and picked up the pace late in 2011 as French banks sold their debt, under pressure to repatriate cash to debt-stressed Europe.

CVC shelved plans before Christmas to restructure the debt when it became clear the banks would not support the proposals, which included a two-and-a-half-year extension on senior debt due in February 2013.

NO RUSH

CVC has repeatedly said it is in no rush to refinance its senior debt in advance of maturity in February 2013

The options for CVC include tipping in more equity, which is seen as unlikely on top of the reported A$1.9 billion already invested in Nine, refinancing the debt, or selling some non-core assets to pay off debt, banking sources have said.

A spokeswoman for CVC declined to comment on Monday.

Nine Entertainment, one of the biggest private-equity owned companies in Australia, has assets including the Channel Nine free-to-air television station, ACP Magazines which publishes the Australian Women's Weekly, ticketing agency Ticketek and Acer Arena.

Sources have previously said that Oaktree and Apollo hold A$1 billion or about 37 percent of the A$2.7 billion senior debt owed by Nine, part of a group of hedge funds including Och-Ziff (OZM.N).

However, Oaktree and Apollo's share of the total debt is actually 28 percent, a second source familiar with the situation said on Monday.

CVC is being advised by Goldman Sachs, Macquarie and Credit Suisse on various solutions.

Should CVC ultimately lose control of the company and is forced to write down its investment, the firm could face a total paper equity loss of $2.2 billion, assuming it has not received any repayment.

Nine has reduced its overall debt load with an agreement to convert A$975 million of mezzanine debt held by three funds managed by Goldman Sachs (GS.N) into equity in Nine, a third person familiar with the situation said.

The three funds -- two Australian and one European -- now hold an undisclosed equity stake, the source said. The person asked not to be named because the agreement is confidential.

The mezzanine debt was due in April 2014.

(Reporting by Victoria Thieberger; Editing by Richard Pullin)

FILED UNDER: