MediaWorks to dispute tax payment
Receivership of MediaWorks may be the move that saves the company, a former TVNZ presenter and New Zealand on Air board member Judy Callingham says.
Callingham said this morning's appointment of Kordamentha, which is expected to be followed by a sale to the broadcasting company's bankers, would be frightening for staff but was necessary to manage excess debt.
"I think this is a very sensible debt restructuring. This may be the thing that saves MediaWorks in the long run. It'll scare people in the meantime, though," she said.
Callingham said TV3 in particular was performing strongly in terms of audience recently, with X-Factor, the GC and Campbell Live part of a suite of excellent programming.
Presenters and staff at embattled MediaWorks will keep their jobs following receivers being appointed to the company, but the taxpayer - potentially owed tens of millions of dollars - will be the big loser.
Brendan Gibson and Michael Stiassny of KordaMentha have been appointed by MediaWorks' senior lenders to manage a transition in ownership from private equity firm Ironbridge.
Gibson said senior lenders - owed around $400m - were forming a new company and intended to retain all current staff.
"All the 1400 employees will keep their jobs. We'll be moving to transfer their contracts at an appropriate time."
Contracts and payments to suppliers would also be met, and current broadcast programming would be unaffected, the receivers said.
Australasian director Rod McGeoch has confirmed he will be chairman of the company that plans to buy MediaWorks.
"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. This puts the company in a much stronger financial position,'' McGeoch said.
"I see a positive future built on the back of the current strong trading performance.''
Well-known television producer Julie Christie will join McGeoch on the new company Board. Other directors will be announced soon.
"We have confidence that the receivers and the company's financial backers will help put those structures in place and then everyone can get on with running the business," said McGeoch.
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 hoped to carry debts of only $100m.
While payments to staff and suppliers would 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.
MediaWorks operates a network of radio and television stations across the country. Television channels include TV3 and Four, radio stations include The Rock, The Edge and RadioLive.
Ironbridge bought MediaWorks in 2007 for $561 million and the broadcaster has struggled with debt and has needed repeated and ongoing financial restructuring.
Media companies broadly, and MediaWorks' television businesses in particular, suffered in the fallout from the global financial crisis with advertising revenue and viewership falling sharply.
Debts saddled on to MediaWorks as part of the Ironbridge purchase have weighed heavily on the business, and on several occasions debt covenants have been broken. In 2010 the company sought, and was granted, a $43m loan from the Government to pay for radio spectrum licence renewals. That loan was repaid in October 2012.
The restructuring following today's receivership will include other holders of MediaWorks debt, TPG, JP Morgan and Oaktree, but will end Ironbridge's association with the broadcaster.
MediaWorks group managing director, Sussan Turner said that moving 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," she said.
"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."