Shares in Consolidated Media Holdings finished higher yesterday after being sold off when James Packer confirmed that the company had effectively given up on PBL Media by refusing to put any more money in to the debt-laden company.
The shares slumped to a low $1.825 a share, before rising as the overall market recovered. They finished up 6c at $2.08, a 3% gain from Friday’s close.
Cons Media confirmed media and market reports that it would reject any attempts from PBL Media’s majority owner, private equity group CVC Asia Pacific, for a capital injection of $75 million.
"Consolidated Media Holdings announces today that . . . the Cons Media board has resolved that Cons Media does not intend to contribute any further funding to PBL Media," it said in a stock exchange announcement.
PBL Media owns the Nine Network stations in Sydney, Melbourne, Brisbane, Darwin and NBN, the NSW and Queensland regional network. It. also owns ACP Magazines, Ticketek and stakes in carsales.com.au and website business, ninemsn.
The announcement implicitly suggests that CVC or another investor will be required to make a substantial funding contribution to help cover PBL Media’s onerous debt obligations, which would dilute Cons Media’s 25% stake.
The confirmation of the figure indicates CVC is looking for $300 million to help improvement the chances of PBL Media from staying out of the hands of its bankers.
The stake in carsales could be on the market, and perhaps the rights to Acer Arena in Sydney or even Ticketek if it wants to raise new capital.
Cons Media’s two representatives on the PBL Media board, James Packer and John Alexander, have resigned from that board "with immediate effect".
Mr Alexander, Cons Media’s executive chairman, is likely to be queried about the board’s decision at its annual meeting in Melbourne today.
It was the second time in three days that Cons Media had told the market that it wouldn’t put any fresh funding into PBL Media.
PBL Media was created in October 2006 after PBL, the Packer family’s former media and gaming business, agreed to the $4.5 billion sale of its media assets to PBL Media, a 50:50 joint venture with CVC.
The payment was largely funded by debt assigned to PBL Media. PBL then sold an additional 25% stake in PBL Media to CVC for $515 million in June last year.
PBL’s remaining 25% stake was transferred to Cons Media late last year in the PBL demerger, which split the company in to Cons Media and the gaming business, Crown Ltd. (Crown’s AGM is in Melbourne as well.)
But chances are rising that PBL Media will be in the hands of its bankers if it doesn’t receive an urgent capital injection.
News that James Packer and his former CEO, John Alexander, bailed from the PBL Media board, together with yet another statement from Packer’s Consolidated Media, about how it isn’t responsible for any contribution to the refinancing of PBL, are signalling that the media group’s finances are approaching collapse.
Cons Media had the statement out on the ASX website before trading started at 10 am.
"Consolidated Media Holdings Limited (CMH) (ASX: CMJ) announces today that, further to its ASX announcement of 23 October 2008, the CMH Board has resolved that CMH does not intend to contribute any further funding to PBL Media.
"Accordingly, any additional capital contribution to PBL Media by its major shareholder Red Earth Holdings B.V. an entity owned by funds advised by CVC Asia Pacific and CVC Capital Partners (CVC) will dilute CMH’s shareholding.
"Mr James Packer and Mr John Alexander, and their alternates Mr Chris Anderson and Mr Martin Dalgleish, have resigned today with immediate effect from the PBL Media group’s boards – PBL Media Holdings Pty Limited, PBL Media Finance Holdings Pty Limited and PBL Media Group Limited. CMH no longer has any board representatives on the boards of the PBL Media group," CMH said in its statement.
There are distinct signs in the two statements and the decisions to leave the board (the AFR has a line direct into Packer’s office) is an attempt to get as far away from the slow train crash that is PBL Media. But Packer’s Cons Press group controls 38% of Cons Media and is still on the hook.
There’s no sign of any action, but to issue two statements in three days and for the senior members of the board to step down from PBL is a sign of legal nerves.
The new capital is wanted by the end of the year because PBL Media has an estimated $120-$130 million in interest and principal due to its banks by the end of the year.
It paid around $100 million in interest at the end of September and has yet to learn from its banks if they think PBL Media is still within the terms of the covenants on its $4.2 billion debt.
For the new money to be sought now means there are fears, doubts even that it is close to breaking its covenants with the banks and a capital boost is needed to keep them happy
That debt is chewing up just under $40 million a month in interest: the company earned $463 million in the year to June and lost money in the second half of 2008. People are still losing their jobs at Nine and at ACP Magazines as the cost cutting goes on.
With Goldman Sachs JBWere forecasting a deeper slump in advertising revenues for magazines and TV next year, PBL Media is facing a much tougher outlook, as are the Seven and Ten Networks and Fairfax and News Corporation.
