Hedge funds led by Apollo Global Management and Oaktree Capital Group are poised to reject Nine Entertainment Co.’s board-endorsed restructure.
Apollo and Oaktree – who own around 40% of Nine’s 2.3 billion Australian dollar (US$2.33 billion) senior debt pile maturing in February 2013 – are expected to table a new offer within the same time frame, the person said.
Their proposal will be less generous to Goldman Sachs Mezzanine Partners GS -1.55%, the owner of A$1 billion in mezzanine debt, than the offer presented by Nine’s board earlier this week which grants a 7.5% equity stake worth around A$150 million and warrants worth 12.5% of any profit made on the future sale of the media company which owns one of Australia’s three commercial broadcast television networks. Goldman on Wednesday voiced its support of the offer.
Nine’s directors have around a fortnight before they must sign-off on fiscal 2012 accounts, a date which could see them place the company into voluntary administration on the basis of its inability to continue as a going concern. Administration or receivership could see a handful of Nine’s key broadcast contracts at risk, or up for re-negotiation on less attractive terms.
“Goldman Sachs Mezzanine Partners yesterday accepted and endorsed the proposal from the Nine board and management as it understands the importance of keeping this leading Australian broadcaster out of administration. Anyone voting against the Nine board and management proposal or trying to renegotiate it is voting to put Nine into administration,” a Goldman Sachs Mezzanine Partners spokesman said Thursday.
The hedge funds – backed by 75% of senior debt holders including par lenders, or banks that held the debt before it became distressed – had previously offered Goldman no equity and warrants worth 10% of any profit from a future sale. Goldman began discussions seeking warrants and equity both worth 30%.
Goldman and CVC Capital Partners struck an agreement earlier this year which could allow the buyout firm to recover a minimal slab of cash in the event Nine is sold. A spokeswoman for CVC declined to comment and a call to Nine wasn’t returned.
A host of senior lenders expressed surprise that Nine Entertainment’s chairman Peter Bush did not commence a sales process for the business as he had proposed, since such an auction may have created clarity around how much individual components of the group were worth, the person said.
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