MediaWorks whacked with 11.2% interest on deferred payments to govt

Struggling media company MediaWorks is up-to-date with its broadcasting licence payments and has not received a bail-out loan from the Government, Communications Minister Steven Joyce says.

The company, which owns television channels TV3 and Four and a nationwide network of radio stations, owes $43.3 million to the Government for the renewal of its radio broadcasting licences, according to its latest accounts.

The money is being paid in instalments over five years at 11.2% interest - which Mr Joyce described today as a commercial rate for a distressed company.

The statement said the debt was a loan from the Government, but Mr Joyce today said no payment had been made to the company and the $43m was actually money owed under a 2009 scheme that allows broadcasters to defer licence payments.

"The reality is that under the scheme they have a debt to the Crown because they haven't paid in full for their frequencies," Mr Joyce told NZPA.

"They have to present it as a debt because it is a debt they owe the Crown, so how they do that is between them and their accountants.

"All I can tell you is that the Crown has not advanced any cash to MediaWorks at all, that the Crown has offered a deferred payment option to all of the frequency holders who were due to renew at that time, which involved them paying interest and getting in their payments over five years."

Mr Joyce said MediaWorks had been keeping to the terms of deferred payment.

"We have full security over the frequencies, so if for example they were unable to make payment then the Crown would obviously have the frequencies back and could re-auction them, so there's no cost to the Crown in that respect," he said.

Mr Joyce previously owned RadioWorks, the company's radio arm, but sold up in 2001.

"I've had no dealings with the company in the eight years since," he said.

Nine broadcasters have made use of the deferred payment scheme since it was introduced in October 2009.

The scheme was designed to help licensees having difficulty paying one-off lump-sum renewal payments for their 20 year spectrum licences -- due last year.

MediaWorks is paying off its radio broadcast licence for the 2011 to 2031 period over a 50 month term at 11.2% interest.

In a report filed last week with the Companies Office, MediaWorks parent company GR Media Holdings showed group earnings before interest, tax depreciation and amortisation (ebitda) of $50 million for the year to August 31, 2010.

For media companies, ebitda provided a recognised measure of profitability independent of funding structures, and was a better measure for group trading profitability, the report said.

In the 8-1/2 months before the end of August -- following restructuring completed in mid-December 2009 -- the company reported a net loss before income tax of $55m.

Total borrowings as at August 31 were $562m.

MediaWorks was bought from its Canadian owners in 2007 by Australian private equity company Ironbridge.

In the restructuring its bankers swapped debt for equity, with the owners now also including Goldman Sachs, the Royal Bank of Scotland, and BNZ.

The latest report notes the company is challenging in court an Inland Revenue Department tax assessment for the years between 2002 and 2004.

The proposed tax adjustments had a potential tax liability of $24.46m, including core tax of $10.2m, interest of about $9.2m, and potential penalties of $5.1m.

The report said the group had complied with debt covenants as at August 31 and, based on current forecast, was expected to continue to comply with those covenants.