Growing uncertainty about the future of the Ten Network (TEN) say the TV group’s shares plunge 19% yesterday to 36 cents, a record low.
That was after the company yesterday confirmed market belief that its finances are wobbly, with the company needing a new $250 million loan, cost cuts and other one offs such as support from major shareholders.
The network’s shares fell sharply – down 25% at one stage yesterday after it confirmed a small operating loss for the six months to February 28, and more importantly, doubts about its ability to continue as a ‘going concern’.
Ten reported a 2.5% decline in revenue to $340 million, and confirmed that weaker earnings and outlook for more of the same, and the sinking share price had forced it to impair the value of its TV licences by $214.5 million.
The impairment charge increased a $2.4 million operating loss to $232 million for the first half of 2016-17. The operating loss was in line with a profit warning issued by management in February, and reiterated on Thursday morning when directors warned that without cuts in the Federal TV licence fees in next month’s budget, the company could lose up to $30 million for the year to August 30.
But it was the warning from directors and the company’s auditor that Ten’s future is uncertain and dependant on a number of factors that saw the shares plunge.
They ended at 36 cents (3.6 cents before last year’s one for ten share consolidation). That valued the company at $130 million just under the value of its licences of $132 million and well below net assets (after the write down) of $152 million.
“There is a material uncertainty that may cast significant doubt on the group’s ability to continue as a going concern,” Ten directors said in their half yearly report released yesterday.
The fate of Ten is now in the hands of its billionaire shareholders, Lachlan Murdoch, James Packer and Bruce Gordon who have lost hundreds of millions of dollars on their share investments in Ten its as the free-to-air broadcaster seeks to put in place the new $250 million loan.
The trio of billionaires are guarantors of a $200 million revolving cash advance facility, of which $45.5 million has been drawn, from the CBA signed back in 2013. It will expire on December 23. The $45.5 million is now ‘current’ in accounting terms.
Some $29 million in guarantor fees on that credit are unpaid and the three investors will have to be reassured that will be repaid in some way before deciding to provide some sort of support for the new facility. There were reports yesterday that the trio will decide whether to support the loan next Thursday.
In reporting its half-year results, Ten said it is seeking a new borrowing facility with an extended maturity and expanded size to $250 million. It said the new loan is required as a result of "expected trading performance and volatility within the free-to-air advertising market."
Ten also noted it will need "sufficient further guarantees by shareholder guarantors and/or new financiers."
Ten has engaged both McKinsey and Korda Mentha to help it deal with the increasing pressures it is facing.
If Ten is unable to work out a deal for a new loan and is unable to pay back the loan to the CBA, its trio of billionaires may have the right to appoint a receiver.
Mr Packer is rumoured to have been trying to sell his stake in Ten, without success.
Ten also confirmed it is in discussions to renegotiate its onerous US content output deals with 21st Century Fox and CBS.
