From a hospital bedside to board room meetings with just an hour’s sleep in between, David Gyngell has become a father and managed to rescue Nine from administration.
Lenders have agreed to a deal that leaves the company debt free just hours after the birth of his son Edmund, to Leila McKinnon.
The deal was announced by Gyngell outside a meeting with the media company’s lenders in Sydney.
“Channel Nine’s back,” he told reporters. “[It] is going to be a debt free company which makes it the most powerful media balance sheet in the country.”
Senior lenders will own a 95.5 per cent stake in Nine and the Goldman Sachs-led Mezzanine lenders, who faced losing the entire $1 billion they had invested in second-ranked debt, will receive a 4.5 per cent stake valued at around $100 million.
“All the doomsdayers out there will have to eat their words,” Gyngell said.
“We’ve never had a more powerful balance sheet.
‘‘We are ready to rock and roll for next year.’’
That will be a story to tell the kids, one day…
Press Release:
The Nine Entertainment Co. (NEC) Group today reached a landmark agreement with representatives of its senior and mezzanine lenders for a restructuring of its financing arrangements.
NEC and its lenders intend to implement the restructure through schemes of arrangement to be implemented over the next 3 months.
Funds managed by Oaktree and Apollo, NEC’s two largest senior lenders (who have advised they are negotiating on behalf of 75% of the outstanding senior debt), as well as Goldman Sachs Mezzanine Partners (representing 80% of the mezzanine debt), have confirmed that they support the terms of the restructure. Full details of the restructure will be contained in the scheme booklets which are expected to be lodged with ASIC in late November.
As soon as the restructure is effected, all the existing senior and mezzanine debt will be converted to equity and the Group will have no debt. In exchange for cancellation of existing senior and mezzanine debt, senior lenders will collectively receive 95.5% of the equity in the Group with mezzanine lenders receiving the remaining 4.5%.
Announcing the breakthrough deal, Peter Bush, Chairman of NEC, 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.”
Mr Bush said the trading and operating activities of Nine Network and Ticketek continue as normal. Customers, employees and business partners of both businesses will be unaffected by the restructure.
David Gyngell, Chief Executive Officer said: “Nine’s back! And 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. 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.”
Mr Gyngell paid tribute to Peter Bush, his team at NEC, and their advisors Macquarie Capital and Gilbert + Tobin who have been extraordinarily helpful working through a very challenging period, and acknowledged the support of CVC Asia Pacific throughout the process.
“It’s been a long and often tortuous process and to all the parties I say a big thank you – because the outcome is the best imaginable result” he said.
Source: NineMSN, smh.com.au
Nine is now owned by Oaktree, Apollo with Goldman Sachs as a minor shareholder.
Seven is owned mostly by Stokes and KKR, another private equity company.
Channel 10′s biggest shareholders are Rhinehart, Murdoch, Gordon and Packer.
Those who bought in 2006 have all lost a lot of money because the value of TV networks has halved due to declines in advertising revenue. CVC most of all they lost $2b.
Hmmm… I’d say Nine is still on death row. Ten are a basket case and hungry Seven are picking at their bones. The whole industry is going through massive change forced upon them by market fragmentation. The effects of the NBN will be devestating.
Another sad day for rugby league. Was hoping nine would go under and the rights would move onto Ten.
Good to see gyngel still at his arrogant best ““All the doomsdayers out there will have to eat their words,” Gyngell said.” This rubbish from a guy who was responsible for nine losing its number 1 crown over the past few years.
David Gyngell’s announcement of Nine being debt free and now having a powerful balance sheet is wonderfully misleading. I too could become debt free if my bank agreed to roll over my house mortgage into an equity investment. The deal that had to be done was relatively simple. It was just a question of how much the 2nd tier lenders would lose and really in the current climate they couldn’t afford to call anybody’s bluff as a fire sale of Nine would have given them nothing. The question is what upside there is for Nine in the next years prior to it being floated again on the stock exchange or whether there is another private consortium which may appear in that period to buy out a hedge fund. If David Gyngell’s job is going to be secure he’s going to have to pull a rabbit out of the hat to make Nine far more profitable. Seeing this all play out in an era of new media will be interesting.
I bet the deal has something to do with Gyngell’s newest arrival.
Still, I didn’t think that Nine would go into receivership.
I loved his comment afterwards “We the bankers all happy” David….”I would not say that”
The reality is they’ll float Nine as soon as the stock market has the confidence for a very public listing.
If you take a look at the fortunes of Ten under new management and Nine’s comeback this year, i don’t think the new owners will want anything other than a strong Nine prior to the float (given we’ve had a soft ASX for the past five years – maybe they’re thinking end of 2013-2014 for the float?).
Don’t think anybody is suggesting the new owners are looking at Nine as a low cost, long term revenue earner??
I’m personally happy to have two very healthy commercial networks prepared to battle it out next year!
So I guess 9 can no longer boast ‘proudly australian’…. David, just who does own 7,9, 10 and SBS ??
If I was a staff member at NBN Newcastle or Channel 9 Darwin, i’d be looking for another job right now. Those channels will be the first to rack in revenue if sold.
Yes, today was a good outcome, but it now moves into a new chapter and it’s called, “What do they want?”
@cglenn1988 – you might want to take those rose-tinted glasses off for a minute. Pertinax has summed it up well – have a read.
It’s not all doom-and-gloom for NEC but you can bet your bottom dollar (on second thoughts – hold on to it) that its new owners (US hedge funds, remember) will be looking to offload it in a few years. In order to make it an attractive proposition they will cut costs (usually including staffing) and then try to sell it before the impact of those cost cuts hits home.
Channel 9′s staff are obviously happy that there will be no administration and some certainty after years of uncertainty. And they want to spin the story with them as the heroes and this being a great victory.
The reality was that this was just a game of poker between two US hedge funds and a US merchant bank and Channel 9 were merely the chips.
The 2nd tier debt, held by Goldman Sachs and their clinets, was worth nothing. They managed to extort $100m for it by threatening to put Nine in to administration and reduce the value Oaktree and Apollo’s asset. They will claim that as a win.
Oaktree and Apollo bought up 1st tier debt at 40c in the dollar at the height of the North Atlantic credit crisis. It was valued at the equivalent of 72c in the dollar last week. So they had already made a paper profit that has nearly doubled their money.
Nine had about $1.5b worth of debt (held by Packer’s holding company) when CVC bought it. CVC borrowed the rest against Nine to buy Nine off Packer. That is where most of the debt came from.
Having a strong balance sheet just means that Nine is a highly tempting takeover target. Someone can now easily borrow against Nine to take it over. The media ownership rules stop most of the people who would want to buy it from doing so though. Oaktree and Apollo will presumably sell out as soon as they get a good offer to lock in their profit.
Nine can talk up its @l^mp!c recovery but it’s programming depth is poor, it is paying way too much for US shows and will make a loss on NRL. Change wrought by digital technology is only just beginning to impact on TV here, and if the NBN works who knows what will happen.
Yay go Nine!
Also, congrats to Gyngell on the baby! What a week it must’ve been!
This is great news for Nine. Pity some just want to attack the network in any way possible. Don’t forget Seven and Ten went through similar problems 20 odd years ago. Hope Nine can prove the critics and haters wrong. Dave Gyngell has done the best job he can and to some, sounds arrogant but don’t forget it must be stressful for him considering his company is under financial pressure and he has a new baby too so obviously a stressful time for him.
NRL rights have been brought up. Seven’s AFL coverage is just as good. There are still delays and its worse in Perth. I believe they have 90 minute delays on Friday nights yet Gem airs NRL live at 5:30pm. If 7 had NRL, it would still have a delayed Friday game and the Sunday arvo one too. I think Ten would air the 3pm game live though if they had it. 7 have a bigger focus on AFL and tennis. The NRL could work on 7 but it could hurt them in the long term afterall it costs money to broadcast sport.
Yeah he sounds arrogant.
So now Nine has US “investors” who will only be interested in one thing -making lots of profit. Seems CVC lost everything. An excellent report on “7:30″. Kerry sold to Alan Bond at a price he couldn’t refuse. Likewise James sold to CVC at an absurdly high price. All on borrowed money, both times. Watch for the cost-cutting now.
I think Gyngells comments today sum up the general arrogance of the man,when asked about the result he commented that not all the parties were happy but at least he was.
Could this lead to more cuts or a further shift from Drama shows to more reality TV?
I’m better Nine will be under tighter control now on what it can do and spend on new programing.
The Nine group is no worth half of what it was just a few years ago, how long did it take for them to rack up such a high debt?
Yeah a powerful balance sheet now! Just wait.
Congratulations for both outcomes. I wish his family well and hope everyone gets much needed rest. Because it will be needed with a newborn.
He comes across a little arrogant. I wouldn’t be bragging about having a “a debt free company which makes it the most powerful media balance sheet in the country” too quickly. There is a reason they were in the debt they were.
@Josh777
I agree. 5 more years of crappy Rugby League coverage.
I know they are debt free but how the hell does $3bn just disappear? That is what doesn’t make sense to me. I’d like to know more details. Oh btw Gyngell is a fool to think this is forward from here. New owners means new management and a new way of doing things so if he thinks this is smooth sailing he is the fool here.
Super Dad? I think Mum did most of the work in that regard
Is nobody a little concerned they named their son ‘Eddie’? LOL!
Completely agree Josh777. So damn close.
More cocky Gyngell! God help us! the only one going to eat their words will be you.
The real interest is what this means for Nine’s board. Giving up my debt for equity means I would want a seat on the board (in fact, several seats depending on how much of the company I now own). I love it when private equity firms take over entertainment businesses.
@dshan: my thoughts exactly.
They may be financially stable for a while but the keys to the kingdom have been handed over to new owners and there’ll undoubtedly be a new set of bottom-line focussed rules, new management structure and a new culture on its way. Out with the old, in with the new.
@Dshan – CVC were stooges and deserved what they got IMO (they agreed to inherit the debt from Packer in the first place as the debt largely wasn’t incurred by Nine itself).
I don’t see any evidence that Nine would be running a cheap reality based schedule in the future without any debt on their books..?
Game on!
So he’s basically had to hand over the company to it’s creditors, the current owners have lost the lot.
They stay on air, but the company has effectively changed hands and all profits now go to it’s former creditors. And as the new owners they now call the shots re programming budgets, staffing levels, pay, etc. Bet they’ll be looking to recoup their losses as quickly and cheaply as possible. Lots of cheap reality shows in Nine’s future I’d say, and not much local drama, or local anything probably.
Still, it’s nice to see Goldman Sachs group have to eat a $900M turd burger.
Congratulations to Nine and especially David Gyngell. Must be the best day of his life. I know that there were a lot of critics including people who wanted him out but he’s proven them wrong.
So who will be playing Gyngell in the new telemovie? Are Rob Carlton & Lachy Hulme free?
How is he a “super-dad”?
It will be interesting to watch Nine’s resurgence now that they have this load off their back.
Not having to worry about money means they can concentrate on chipping away at Seven.
Gyngell is right about the critics having to eat their words.
Gyngell (Snr) was the first person to appear on Australian TV and his grandson was born on the day his son saved the network.
That’s gotta go down in TV history…
Damn so close to the NRL rights being sold off to networks that would actually give it the time of day >.< Heres to five years of delayed telecasts in standard definition =(