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Nine will still be the one

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by Peter Switzer

The irony for the current owners of Channel Nine is that they’re being made to face unhelpful creditors at a time when the outlook for the company is on the improve. And that, in part, explains why the lenders are playing hardball with the company.

Today the company will know its fate, but have no fear, the Network will go on — Nine News will be there at 6pm and A Current Affair will keep exposing dodgy builders and the best as well as the worst diets. The only thing that’s bound to change is who owns the joint.

In recent times

Nine Entertainment, as the company is now called is owned by a private equity group called CVC Asia Pacific. These hotshots with deep pockets were taught a lesson in capitalism by James Packer, who while he owned it had had his business skills questioned by a snaky group of business journalists.

James flogged his old man’s business for $5.3 billion in 2007 before the GFC crash of stock markets, showing he knew that the then valuation represented a good deal — a very good deal.

He pretty well ran away from free-to-air TV to punt on casinos, which has returned him a nice dividend as well.

In a nutshell, CVC has $4 billion worth of debt and heading up the lenders are two hedge funds — Oaktree Capital and Apollo Global Management — and these guys hold the trump cards. Below them is Goldman Sachs, which the hedge funds are trying to screw and it’s a real cat and mouse game as Goldman hangs tough to try and get a better deal.

Goldman could force the company into receivership, but the hedge funds would still control the company and it wouldn’t be in their interest to trash Nine as it would affect ratings and then the value of the operation.

Spend money to make money

Lately, with such programs as The Voice, The Block, and Howzat, the company’s boss, David Gyngell, has proved he can resuscitate an ailing TV network but if he’s kept on by the new owners — and he should be — the question is will they be supportive of spending money to make money?

There will also be some sleepless nights for the management of the NRL with a billion dollar contract for TV rights, and Cricket Australia will also be interested in today’s outcome for Nine.

Who knows, we actually might see Billy Birmingham — the master of cricket impersonators — replace the entire Nine cricket commentary team after all!

The irony for CVC is that as stock markets improve, the ad market will become healthier and Nine’s potential value will go up. However, the hedge funds know this and so they would rather be owning the company than just being a lender. Goldman would have a similar view.

Of course, Seven is the number one station nowadays but Nine, even after today’s decisions, will still be in the game to maybe eventually be able to pull out its old war cry: “We’re still the one.”

Overnight on Wall Street

PS: The Dow was up 95.38 points or 0.72 per cent to finish at 13,424.23 while the S&P 500 added 11.54 points or 0.81 per cent to end at 1440.13.

I liked:

The S&P 500 moving away from the testing level of 1420.
Retail sales in the USA rising nicely in September.

On the flipside, manufacturing in the state of New York contracted for the third month in a row and the market is still worried about Greece and Spain.

I expect local stocks to do OK today.

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

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Published on: Tuesday, October 16, 2012

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