Commonwealth Bank of Australia (CBA), ASB's parent, is selling its NZ$70 million chunk of MediaWorks' NZ$388 million senior loan for around 50 cents in the dollar, The Australian Financial Review reports.
MediaWorks owns TV3, Channel 4 and a stable of radio stations including Radio Live, More FM, The Rock and Mai. It was bought by Australian private equity group Ironbridge Capital in a leveraged buyout in 2007 from 70% owner Canada's CanWest Global and minority shareholders including Brook Asset Management in a deal valued at around NZ$790 million.
The senior loan, from which CBA's slice comes, totals about NZ$388 million. Other lenders include Britain's Lloyds Banking Group, the Bank of New Zealand, Westpac, Royal Bank of Scotland, JP Morgan and Rabobank. In July Allied Irish Banks was reported to have sold between NZ$30 million and NZ$35 million of debt at between 60 cents and 70 cents in the dollar to Asian hedge funds.
AFR says CBA was set to auction the MediaWorks debt on Friday. The newspaper quoted Ironbridge partner Mike Hill saying MediaWorks continued to perform well in a challenging advertising market, was trading to budget and forward advertising bookings were in line with expectations. CBA also recently sold an A$37 million slice of Nine Entertainment senior debt for about A87 cents in the dollar.
MediaWorks' was due to have a new banking covenant introduced on November 30, which is a leverage ratio, or borrowings relative to earnings before interest, tax, depreciation and amortisation (EBITDA). MediaWorks will also have a debt service cover ratio, or cashflow relative to interest and debt repayments, covenant added from February 28 next year. Already in place are three covenants - an interest cover ratio, or EBITDA relative to interest, a minimum EBITDA ratio, and a net capital expenditure limit. See more here.
A capital restructure in late 2009 saw NZ$70 million of equity tipped into MediaWorks, with GR Media Holdings emerging as MediaWorks' parent company in place of HT Media Holdings. The NZ$70 million was used to repay debt, reset fixed interest rate swaps and provide ongoing liquidity.
As part of the restructure, Goldman Sachs converted debt into equity and Companies Office records now show the investment bank with a 7.8% stake in GR Media Holdings. Other GR Media shareholders, who weren't previously listed as HT Media shareholders, include the BNZ, the Royal Bank of Scotland Plc and RBS (New Zealand) Ltd, Uberior Investments which is the private equity arm of Halifax Bank of Scotland, all with 4.2% stakes. Both Royal Bank of Scotland and Lloyds subsidiary Halifax Bank of Scotland have the British government as their major shareholder.
It appears that these banks, like Goldman Sachs, converted debt in MediaWorks into equity in the capital restructure.
Aside from MediaWorks' senior loan, there's a further NZ$97 million of the company's subordinated debt is held by Halifax Bank of Scotland, Royal Bank of Scotland and Ironbridge. There's also a NZ$24 million payment in kind facility managed by Goldman Sachs and the controversial NZ$43 million "deferred spectrum payment" with the government for the renewal of radio licences for the 20 years to 2031. MediaWorks is charged interest at 11.2% per annum for the latter, which runs for 50 months.
In its last available financial results, for the year to August 31, 2010, MediaWorks reported proforma EBITDA of NZ$50.1 million. It delivered a loss after tax of NZ$50.9 million with expenses of NZ$176.5 million, excluding NZ$49.9 million of finance costs, outstripping NZ$171.5 million of revenue.
5 Comments
Soooo, that means at least one of the debt holders thinks a 50% haircut is a good deal. I wonder what the others feel? What does this mean for the future of Mediaworks? I should add that the advertising industry is horrible at the moment and the worst I seen in many years, which doesn't bode well at all.....
The NZ$70 million was used to repay debt, reset fixed interest rate swaps and provide ongoing liquidity.
Fixed rate IR swaps are expensive instruments in a falling intetrest rate environment. as is the 11.2% rate on the government deferred licence payment .
All the while the RBNZ coddles survival of the fattest rather than promoting survival of the fittest with with with -
I cannot understand the "deferred licence payment" decision. I assume MediaWorks have a host of individual licences which are property rights (like fishing quota).
If the present owner were unable to afford some or all of the 20 year renewal costs, why didn't they (or the government) offer the rights (licences) as asset sales - as one assumes they could encumber the title transfer with some form of lease-back arrangment to MediaWorks (if the Government's policy intention was to maintain some degree of continuity of employment for the existing operations).
Even then, one has to question the sense of such a policy intention. Radio stations, I would imagine have a low (capital) start up cost - I believe the licence or frequency (property right) has traditionally been the most significant up front cost - which locked alot of "little guys" out of the previously held frequency auctions. If the MediaWorks stable got split up into smaller bits - we'd get more locally (as opposed to nationally) owned and operated radio stations. Would that necessarily be a bad thing?
The granting of a "deferred licence payment" makes a mockery of the "market" model for radio spectrum ownership which was set up back in the late 80s. Again, Key's government seems to promote markets as being the ideal ownership model (as per mixed-ownership asset sales) - but then when the market fails (as has obviously been the case with this legal entity being unable to pay to retain an asset) - the Government steps in courtesy of the taxpayer (who will never see that principle + debt arrangement go to term).
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