Creditors to meet on Ten’s future

Creditors of the embattled Ten Network will meet for the first time with administrators in Sydney within a fortnight as takeover rumblings continue around the broadcaster.

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Speculation has centred on billionaire shareholders Lachlan Murdoch and Bruce Gordon as possible buyers of Ten if it goes into liquidation, while a new analyst report has slashed the broadcaster’s fair value estimate to zero.

Creditors of Ten will meet at the Sofitel Hotel in Sydney on Monday, June 26, to discuss the network’s future.

Ten went into voluntary administration on Wednesday after Mr Murdoch and Mr Gordon, who respectively hold 7.7 per cent and 15 per cent of Ten, declined to extend their current guarantee on the network’s $200m debt facility to a new, $250m facility needed by December.

Letters released on the ASX show Mr Murdoch and Mr Gordon, who own their Ten stakes through their respective private investment companies Illyria and Birketu, have now combined their voting power and are working together on a plan to restructure or repay Ten’s debt.

In the event of a default by Ten, Birketu and Illyria risk “significant liability”, a June 9 letter from Birketu to Illyria director Siobhan McKenna says.

The letter, which predates the voluntary administration, states Birketu and Illyria “have agreed to work together exclusively to facilitate the potential formulation, negotiation and implementation of a restructure proposal”.

With the fall of Ten renewing the focus on Australian media ownership laws, the Birketu letter states “for the avoidance of doubt,” that there is no proposal from Birketu or Illyria to make a takeover bid for Ten.

Speculation remains, however, that Mr Gordon or Mr Murdoch may be bidders for Ten if it goes into liquidation, while the administrator is investigating options for refinancing or a sale of the business.

With shares in Ten suspended from official quotation, following a trading halt on Tuesday, Morningstar senior equity analyst Brian Han said the voluntary administration had cut his estimate of Ten’s fair value to zero.

Mr Han said Morningstar’s previous fair value estimate of 30 cents, which already incorporated a 50 per cent probability that the group would fail to refinance, had been “obliterated” by the arrival of administrators.

“It is now clear that we have been too optimistic even with that assessment,” Mr Han said in a note, Thursday.

“The development obliterated our previous view that improving ratings and revenue share trends may have given Ten a chance of convincing the lender/guarantors to extend the credit lifeline.”

Mr Han added that Ten’s current shareholders are now unlikely to recoup any remaining investments in the group.

Despite Ten claiming on Wednesday it had identified savings and other items that would add $50 million to earnings in 2017/18 and more than $80 million in 2018/19, the broadcaster was unable to convince the facility lender roll over the loan without any guarantor support.

Administrator KordaMentha has promised business as usual at Channel Ten while it canvasses refinance or sale options.

“The administrators are confident that the network is an attractive asset which will find a buyer or will be recapitalised,” KordaMentha partner, Mark Korda said on Wednesday.

Ten shares are suspended from the ASX and were at 16 cents before entering a trading halt on Tuesday.