MediaWorks in receivership after lenders including Westpac fail to reach recapitalisation deal

TV3 owner MediaWorks has been placed in receivership with KordaMentha's Brendon Gibson and Michael Stiassny appointed receivers.

The announcement comes after the Australian Financial Review reported over the weekend that lenders led by Westpac Banking Corporation and RBS Group had failed to strike a recapitalisation deal. MediaWorks had about $700 million of debt. Private equity group TPG’s Oaktree Capital, Rabobank and JPMorgan are also among lenders to the company.

Australian private equity group Ironbridge Capital bought MediaWorks via a leveraged buyout valued at about  $800 million in 2007. Ironbridge has already lost all of its equity investment, about $300 million.

A MediaWorks statement today said KordaMentha had been appointed to oversee the receivership of MediaWorks NZ Limited and its subsidiaries, including RadioWorks Ltd and TVWorks Ltd.

“We are working with a strong management team and assuring current employees, customers and suppliers that it is business as usual. We are in a fortunate position whereby MediaWorks’ funders have provided funding and are committed to the future of the business. This extends to a commitment that all those who have supplied goods or services to the companies before receivership, will be paid what they are due," said Gibson.

“Arrangements are well advanced with a proposal to transfer the business to new ownership suitable for the long term. We anticipate that this will be concluded quite soon,” Gibson added.

Australian businessman Rod McGeoch, a director of both SkyCity and Telecom, will chair the new senior lender controlled MediaWorks owner.

“I’m upbeat about the opportunities ahead for the business. It goes without saying that the new company needs the right capital structure to continue successfully. We have put in place a capital structure that will see debt levels reduced from over $700 million to less than $100 million," McGeoch said.

Television producer Julie Christie will also be on the new company's board.

MediaWorks managing director, Sussan Turner was quoted saying a move to a new structure was inevitable.

“For some time now, management has been working closely with our funders to settle on a structure that will enable MediaWorks to reduce its debt burden. The debt structure that was adopted when MediaWorks Limited changed hands in 2007 was unsustainable after the GFC. Our core business is strong and all divisions are trading well. We are confident that we can successfully build on this solid platform."

"Under receivership it will be business as usual as we transition to a new company with an appropriate, right sized capital structure,” Turner said.

See all our previous MediaWorks stories here.

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3 Comments

Some how the tricky avoidance of an IRD liability seems to have got lost in translation.
 
MediaWorks' most recently published financial accounts filed with the Companies Office, to August 2011, show total liabilities of $698m.
 
Gibson said the current levels of debt were similar, "circa $700m," he said, but the new company comprised of senior lenders hoped to carry debts of only $100m.
 
While payments to staff and suppliers were likely to continue, Stiassny said a disputed debt to IRD before the courts over the use of Optional Convertible Notes was likely to be unpaid.
 
"At the current time it is in dispute with the IRD. If it was to come home and be a legitimate debt, in those circumstances it will be very unlikely it will be carried across [to the new company]," Stiassny said.
 
Receivership was chosen as the means to restructure debts that had become unsustainable for Mediaworks, Stiassny said. "This is a story about a debt structure that has killed a business," he said.
 
Why do I feel that corporate law is not on the taxpayers side here? Or is it just another example of privatising the profits while I and my cohorts socialise the losses? Read more

I don't see how they (the receivers) can simply transfer assets into a new entity and not have to go through liquidation. How can that much debt be written off and then continue to operate?

Hopefully the new owners will be more intelligent, rational, and purposeful than the last....