MediaWorks takes $241.6M charge as Oaktree emerges as debt holder

(BusinessDesk) - MediaWorks NZ, the broadcaster whose stable includes TV3 and Four, and radio stations including the Rock, MoreFM, has written down the value of goodwill by $241.6 million in a capital structure that includes US private equity investor Oaktree Capital Management holding a chunk of its debt.

The group's holding company, GR Media Holdings, posted a loss of $305.6 million in the year ended Aug. 31, 2011, compared to a loss of $50.5 million a year earlier, MediaWorks said in a statement. Earnings before interest, tax, depreciation and amortisation fell 12 percent to $44.2 million, with revenue relatively flat at $241.6 million.

Oaktree bought $125 million of the broadcaster's debt at a reported discount of 50 percent, according to the Australian Financial Review. The US private equity firm also owns debt associated with troubled Australian media group Nine Entertainment.

"The board of GR Media Holdings Ltd consider this a positive development which will assist in the speedy resolution of the pending debt restructure," it said, referring to Oaktree's acquisition.

MediaWorks' writedown comes as Australian private equity owner Ironbridge Capital teamed up with former rival TPG Capital to put forward a restructuring proposal to its senior lenders, and an announcement is expected to be made before the end of the year, it said.

"All stakeholders - including senior lenders, Ironbridge and TPG - remain fully supportive of the company, its staff and management," it said.

The restructure will see MediaWorks shuffled into a new holding company for a second time, a write down in the value of its existing debt, new finance facilities provided and a lending covenant terms established. The recapitalisation will also satisfy a $43 million debt owed on its spectrum licence.

"Interest costs will be significantly reduced and the funding structure will support future investment in the operating companies as required," the company said.

MediaWorks has been strapped for cash since Australian private equity firm Ironbridge bought CanWest’s 70 percent stake in 2007 for some $741 million in a leveraged buy-out.

Since then, the media company’s lenders didn’t pursue some $266.7 million owed by the previous holding company HT Media Holdings after agreeing to a restructure that gave them equity in the broadcaster, according to the company’s first liquidator’s report.

MediaWorks faced a smaller interest bill from its lenders of $30 million compared to $50 million a year earlier, though it didn't disclose its level of indebtedness, which was some $562 million as at Aug. 31, 2010.

The 2011 loss includes a $17.7 million provision for an onerous programme contract and the cost of analogue transmission.

It also accounts for a $13.1 million acceleration in its depreciation and amortisation charges on the national analogue network which is shutting down.

In June, the broadcaster said it planned to spend more on local television programmes as it winds down its deal with CBS Broadcasting and stops taking new shows from the most-watched network in the US.