For the second time in nearly three decades, the Ten Network, Australia’s third commercial operation has collapsed under the weight of unsustainable debts, weak revenues, poor governance and shareholder abandonment, not to mention the dramatic slide in revenue among legacy media sectors.
In a statement to the ASX just after 11.30 am. Ten directors announced the decision and said Korda Mentha, the Melbourne-based accounting and workout group (they are also doing the huge Arrium steel revamp and sale) had been appointed as voluntary administrators of the Company and each of its subsidiaries.
Directors said the decision to go for voluntary administration followed the decisions by shareholders Illyria (Lachlan Murdoch’s investment arm) and Birketu (Bruce Gordon’s investment arm)” over the weekend which left the Directors with no choice but to appoint administrators.”
That decision was not to guarantee the $250 million loan that Ten was looking for to replace the $200 million revolving credit from the Commonwealth Bank that was due in December.
In other words, Lachlan Murdoch and Bruce Gordon abandoned Ten at its time of need, delivering a death sentence to it and its 17,000 small shareholders. Trading in Ten shares had been suspended yesterday for two days as a result of that news, but it was clear the company was heading for administration. From the Ten statement that the administration move was chosen to avoid Ten trading as in solvent as the company’s short terms debts clearly exceeded short term assets, with no way of bridging the gap, now or by December 23 when the millions owned under the CBA loan need to be repaid.
Directors said they had made good progress on cutting costs and renegotiating onerous contracts, but without the guarantees for the $250 million loan, the main part of the revamp plan, the company was doomed for collapse.
Administration will also allow Ten to restructure program supply agreements with CBS (the most onerous being based on profit share from Ten’s ONE and Eleven digital channels) and with the Murdoch clan’s 21st Century Fox.
Production deals with other suppliers, such as Endermol Shine (50% owned by 21st Century Fox) and Fox Sports (100% owned by News Corp) will remain in place.
Ten directors said in yesterday’s statement "This decision comes despite the Ten Group making significant progress to realise the potential sources of improvements to future earnings identified in the Company’s Directors’ Report contained in its Half Year Financial results announcement, that is: delivery of the cost and revenue initiatives identified in the transformation process currently underway; renegotiation of material programming contracts; and reduction in Federal Government imposed licence fees.”
"In relation to the transformation process, the Company has identified initiatives that are expected to have a positive impact on earnings in the order of at least $50 million in FY18 and potentially more than $80 million per annum by FY19.
“In relation to the renegotiation of programming contracts, the Company has agreed in principle the vast majority of the commercial terms of replacement volume content supply agreements with its US studio partners, Fox and CBS, although final terms have not yet been formally agreed.
The effect of these replacement content agreements, if finalised and implemented, would be to reduce by approximately 50% the Group’s future liabilities for US content, while still allowing TEN access to the best productions of those studios over the medium term.
"In relation to the reduction in Federal Government imposed licence fees, TEN anticipates that after the changes to regulations anticipated to be tabled in Parliament tomorrow pass through the Parliamentary process, the reduction in licence costs for TEN in FY17 will be in the order of $22 million and, in FY18, $12 million.
"The administrators have advised the Company that they will work closely with management, employees, suppliers and content partners while they undertake a financial and operational assessment of the business. During this period, the Administrators intend to continue operations as much as possible on a business as usual basis, “ directors said.
Now News Corp Australia papers are reporting that Lachlan Murdoch and Bruce Gordon – the two who sank the company – are working on a plan to save the company. That is a joke.
