Goldman Sachs Funds Back Nine Entertainment Restructure Proposal

   By Gillian Tan 
 

SYDNEY--Funds managed by Goldman Sachs Group Inc. (GS) agreed Wednesday to a new proposal put forward by Nine Entertainment Co. to restructure its debt and stave off a threat of administration, throwing the gauntlet down to hedge funds to swing behind the plan as well.

Goldman Sachs-managed funds are supporting the proposal, which grants them a 7.5% equity stake in CVC Capital Partners-backed Nine Entertainment and warrants worth 12.5% of any profit made on the future sale of the media company.

The move puts pressure on hedge funds led by Oaktree Capital and Apollo Global Management to give their blessing to a restructure of Nine Entertainment, which operates one of Australia's three commercial television networks.

"Goldman Sachs Mezzanine Partners understands the importance of keeping this iconic Australian broadcaster out of administration and is supporting the Nine board and management. Therefore Goldman Sachs Mezzanine Partners has agreed to endorse Nine's proposal," a spokesman said.

Goldman Sachs, which owns 1 billion Australian dollars (US$1.02 billion) in mezzanine debt, initially sought an equity stake of 30% and warrants worth 30%. Its decision to support the current proposal reflects a desire to prevent Nine from being placed in administration.

Senior lenders now have the choice of converting their A$2.3 billion in distressed loans into a 92.5% equity stake, or letting the company become insolvent. Appointing administrators would likely mean they gain full control of Nine, given senior debt holders would rank higher than mezzanine debt holders among creditors.

Nine's board proposal will see the new entity accept no more than A$1 billion of debt. It values the media company at nine times earnings before interest, tax, depreciation and amortization, or ebitda, in the 2013 fiscal year - projected to be around A$250 million. In contrast, listed peer Ten Network Holdings Ltd. (TEN.AU) is trading at 10 times ebitda.

-Write to Gillian Tan at [e-mail]

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