Ten Network creditors will meet for the first time with administrators in Sydney next Monday as questions are being asked about the way the company went into administration on Wednesday and the roles of two major shareholders, Lachlan Murdoch and Bruce Gordon.
Both men have agreed to combine their shareholdings in the company (which appear to have no value) which would give them a total stake of 22.5%, but claim that would not breach takeover rules or limits on ownership in media companies.
Speculation has centred on the two billionaire shareholders possible buyers of Ten if it goes into liquidation, but the Financial Reviews Chanticleer column yesterday revealed (http://www.afr.com/brand/chanticleer/something-twisted-in-tens-collapse-20170614-gwr5ke) that Murdoch and Gordon threatened to sue the Ten directors.
"Lachlan Murdoch and fellow billionaire Bruce Gordon had threatened to sue all the directors of Ten if they went ahead with a recovery plan. That threat was contained in a letter sent to the Ten directors on Monday night at 9pm. The same letter was sent to the directors of Ten’s subsidiary companies, which included Ten chief executive Paul Anderson and chief financial officer Dave Boorman,” columnist Tony Boyd reported.
The letter was sent by Murdoch and Gordon’s advisers, Fort Street Advisers. Besides revealing they would not guarantee the proposed $250 million loan, The AFR quotes from the letter suggesting Ten is far more heavily in debt that the $66 million figure disclosed with theFebruary 28 results, released on April 27:
“The letter, a copy of which has been obtained by Chanticleer, said the billionaires understood the company would need $45 million ‘in the coming few days’. It said that the company would need to draw down $147 million by the end of this week and $173 million by the end of July.”
Ten’s creditors will meet at the Sofitel Hotel in Sydney at 10am on Monday to discuss the network’s future.
Administrator KordaMentha has promised business as usual at Channel Ten while it canvasses refinance or sale options.
“The administrators are confident that the network is an attractive asset which will find a buyer or will be recapitalised,” KordaMentha partner, Mark Korda said in a statement on Wednesday.
Monday’s meeting should be brief and involve an early update for creditors wanting news about their debts and Te’s financial position.
Letters released on the ASX late Wednesday show Mr Murdoch and Mr Gordon, who own their Ten stakes through their respective private investment companies Illyria and Birketu, have now combined their voting power and are working together on a plan to restructure or repay Ten’s debt.
In the event of a default by Ten, Birketu and Illyria risk "significant liability", a June 9 letter from Birketu to Illyria director Siobhan McKenna says. The letter, which predates the voluntary administration, states Birketu and Illyria "have agreed to work together exclusively to facilitate the potential formulation, negotiation and implementation of a restructure proposal".
With Ten collapse renewing the focus on Australian media ownership laws, the Birketu letter states “for the avoidance of doubt,” that there is no proposal from Birketu or Illyria to make a takeover bid for Ten.”
Speculation remains, however, that Mr Gordon or Mr Murdoch may be bidders for Ten if it goes into liquidation, while the administrator is investigating options for refinancing or a sale of the business.
But is there value left in Ten? Morningstar senior equity analyst Brian Han says the voluntary administration has forced him to cut his estimate of Ten’s fair value to zero.
Mr Han said Morningstar’s previous fair value estimate of 30 cents, which already incorporated a 50% probability that the group would fail to refinance, had been “obliterated” by the arrival of administrators. The last sale of Ten shares a week ago today wqas 16 cents (1.6 cents before last year’s 10 for one share consolidation).
“It is now clear that we have been too optimistic even with that assessment,” Mr Han said in a note to clients yesterday
"The development obliterated our previous view that improving ratings and revenue share trends may have given Ten a chance of convincing the lender/guarantors to extend the credit lifeline."
Mr Han added that Ten’s current shareholders are now unlikely to recoup any remaining investments in the group – meaning that Messrs Murdoch, Gordon, James Packer (who owns a 7.7% stake) and Gina Rinehart, with a stake of just under 10%, have lost hundreds of millions of dollars, as have 17,000 or so other shareholders.
