Network Ten goes into voluntary administration
Network Ten has announced it will go into voluntary administration after failing to secure a continuation of funding.
KordaMentha will be appointed as administrator by the company after it announced on Tuesday that its billionaire shareholders would no longer guarantee a key loan.
In a statement to the ASX on Wednesday, Ten announced KordaMentha had been appointed as voluntary administrators.
Illyria, Lachlan Murdoch's private investment vehicle, holds 7.5 per cent of Ten shares, while Bruce Gordon's Birketu controls 15 per cent. James Packer, is understood to be keen to sell his 7.7 per cent stake.
"This decision follows correspondence received from Illyria and Birketu over the weekend which left the directors with no choice but to appoint administrators," Ten said in a 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
• 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.
Ten said administrators had advised the company 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.
"The Directors of TEN regret very much that these circumstances have come to pass. They wish to take this opportunity to thank all TEN employees and contractors for their commitment and enthusiasm for TEN's programs and business. In particular, they would like to express their sincere gratitude, respect and admiration for TEN's leadership team, who have achieved everything the Board has asked them to do over the past few years in very
"They wish TEN and its management TEN all success in the future as the Administrators look to the potential sale or recapitalisation of the business.
Ten shares had been in trading halt
Ten Network Holdings' shares were placed into a trading halt yesterday morning, amid speculation the network may announce a voluntary administration after three key backers decided not to support a new funding deal to refinance a $200 million loan.
The Australian reported Ten shareholders Lachlan Murdoch, Bruce Gordon and James Packer have decided against guaranteeing a new $250 million loan to replace the existing $200 million overdraft, which needs to be repaid to Commonwealth Bank in December.
The network's board is weighing its options while the trading halt remains in force, a process that could take several days.
"Over the weekend, Ten received correspondence from financial advisers Illyria Pty Limited and Birketu Pty Limited, two of the shareholders which guarantee the company's current financial position," company secretary Stuart Thomas said in an update to the ASX this morning.
"That correspondence confirms that those guarantors do not intend to extend or increase their support for the company's credit facilities beyond the term of the current facility which expires on 23 December 2017."
Illyria, Lachlan Murdoch's private investment vehicle, holds 7.5 per cent of Ten shares, while Bruce Gordon's Birketu controls 15 per cent. James Packer, is understood to be keen to sell his 7.7 per cent stake, Fairfax Media reports.
Mr Thomas requested that the shares remain in a trading halt for at least 48 hours while the company considered its position and "the range of restructuring and refinancing initiatives underway".
TOUGH TIMES FOR TELEVISION
Ten, which boasts hit shows The Bachelor and MasterChef and Big Bash cricket, had hoped to secure new funding faded over weekend.
At its recent half-year results, the company admitted it may not be able to carry on as a going concern after posting a $232.2 million loss.
As Australia's third-placed free-to-air network, Ten has struggled to raise enough advertising revenue to cover its costs.
The rise of streaming services like Netflix, Stan, Amazon Prime and Foxtel now has put the television industry under pressure, while online media also competes for advertiser dollars.