Private equity firm CVC Asia Pacific has been forced to agree to pump a further $25 million into the debt-riddled PBL Media.
The move is set to dilute the stake held by James Packer's Consolidated Media Holdings in the vehicle below 10 per cent.But The Australian understands the major banks in the syndicate backing the private-equity joint venture are close to throwing the troubled media group -- which owns the Nine Network and ACP Magazines -- a lifeline.
The additional $25 million has been offered by CVC in exchange for the banks agreeing to relax debt covenants. With CVC's total injection into PBL Media reaching $325 million, rather than the previously offered $300 million, the banks are likely to agree to PBL Media generating reduced operating profit for the next 18 months.
The syndicate includes Australian banks such as ANZ and Westpac, as well as UBS, Royal Bank of Scotland and Credit Suisse.
CVC's relaxed debt covenant requirements for PBL Media would come in a period when advertising is expected to fall sharply.
The Packer-controlled ConsMedia had until last month controlled 25 per cent of PBL Media, while CVC had owned 75 per cent. With its decision not to join CVC in pumping more equity into PBL Media, ConsMedia's stake had been expected to fall to 10 per cent.
But with CVC's new $25 million injection, it is now expected that the stake of Mr Packer's group will fall below this level.
In PBL Media's 2007-08 annual accounts, audit firm Ernst & Young said it was "not likely to meet all of its financial covenants for the next 12 months" without a debt restructure.
Financial debt commentator Debtwire said last week that PBL Media's bankers had been concerned the vehicle could fail its covenant test for the December quarter, having "barely passed" its September-quarter covenant test.
Under the new arrangements for 2008-09, the base case for operating profit (EBITDA) for PBL Media fell by $105 million, or 22 per cent, from a current $480 million to a minimum of $375 million, Debtwire said.
Similarly, the base case for 2009-10 falls by more than a quarter, from $525 million to $390 million.
Another covenant calls for the company's operating profit to at least equal PBL Media's interest payments for the next 18 months.
Debtwire has indicated that part of the proposed capital injection by CVC would be used to buy back a proportion of PBL Media's debt that is currently trading at 52c in the dollar.
In exchange for relaxing their covenants, the banks will receive a 25 basis point fee from PBL Media.
(Credit: The Australian)
Media Man Australia Profiles
James Packer
Network Nine Australia
Media Man Worldwide is part of the Media Man Group of companies aka Media Man. Media Man is primarily a media, publicity and internet portal development company.
