MediaWorks’ lenders in box seat, Ironbridge out in the cold

MediaWorks NZ's stable of lenders are in the box seat to take control of the heavily indebted broadcaster, appointing receivers and embarking on a plan that will leave Australian private equity owner Ironbridge Capital out in the cold.

The Auckland-based broadcaster is expected to cut its debt to less than $100 million from more than $700 million across the group with its lending syndicate "well advanced" in plans to take over the company, receivers Brendon Gibson and Michael Stiassny of KordaMentha told media in Auckland today.

The proposed deal will see MediaWorks' assets transferred to a new entity owned by the senior lenders, who have pledged to take on all 1400 staff and pay all of the company's suppliers.

"The senior debt lenders have got significant amounts involved in this company," Mr Gibson says. "They can pay a price they think reasonable."

The lenders include Westpac Banking Group, Rabobank, RBS Group, TPG Capital, Oaktree Capital and JP Morgan, and the company will be chaired by prominent Australian business Rod McGeoch, with former Eyeworks Touchdown boss Julie Christie, best known in New Zealand for a string of reality TV series, joining him on the board.

MediaWorks's $387.7 million senior facility was fully drawn down as at August 31, 2011, as was its $15 million working capital facility, according to its latest financial statements lodged with the Companies Office. It also had subordinated debt of $96.8 million and $24.3 million payment in kind shareholder loans.

A going concern

Mr Gibson says they plan to complete the deal as quickly as possible, which is effectively selling it as a going concern.

While the transaction is not a done deal – with the receivers obliged to entertain all bids to get the best price – it effectively ends Ironbridge's involvement in the business since its debt-funded purchase of CanWest's 70 percent stake in 2007 valuing the broadcaster at some $741 million.

IronBridge told investors in mid-2012 that MediaWorks was unlikely to generate a return.

MediaWorks managing director Sussan Turner says in a statement that management has been working with the company's funders for some time to reduce its level of debt, which has been unsustainable after the global financial crisis.

"Our core business is strong and all divisions are trading well," Ms Turner says. "We are confident that we can successfully build on this solid platform."

MediaWorks' holding company, GR Media Holdings, wrote down the value of goodwill by $241.6 million in a capital restructure last year that brought in US private equity investor Oaktree holding a chunk of its debt.

As at August 31, 2011, the broadcaster's goodwill was valued at $142 million.

That restructure was to see MediaWorks moved into a new holding company for a second time, a write down in the value of its existing debt, new finance facilities provided, and lending covenant terms established.

The media company's lenders did not pursue some $266.7 million owed by the previous holding company, HT Media Holdings, after agreeing to a restructure that gave them equity in the broadcaster, according to the company's first liquidator's report.

(BusinessDesk)