MediaWorks debt bought up by US private equity - Ironbridge out?

Mediaworks debt has been bought up by US private equity giant TPG. Photo /  Martin Sykes
Mediaworks debt has been bought up by US private equity giant TPG. Photo / Martin Sykes

Giant United States private equity group TPG, formerly Texas Pacific Group, has bought a slice of MediaWorks' senior debt and a major shake-up in the media company's ownership, that could ultimately force out major shareholder Ironbridge Capital, appears to be underway.

Interest understands TPG has bought MediaWorks' debt with a face value of $70 million from ASB's parent Commonwealth Bank of Australia at a significant discount making it the company's biggest debt holder.

The debt is part of MediaWorks' $388 million senior loan with other senior lenders including BNZ, Westpac, Bank of Scotland International, which is now part of Lloyds Banking Group, JP Morgan and Rabobank.

TPG led a move on Australian energy group Alinta Energy that culminated earlier this year in its shareholders handing control over to lenders and retrieving just A10 cents in the dollar after a near three-year battle.

Alinta's lending syndicate secured control of the group's assets after a A$2.1 billion debt-for-equity swap was approved by creditors and unitholders.

Long-term game understands TPG has similar long-term ambitions for MediaWorks, regarding its current debt load - said to be equivalent to about 11 times earnings before interest, tax, depreciation and amortisation (EBITDA) - as about twice as much debt as the business can realistically carry, which is untenable and holding back a company with good businesses.

MediaWorks owns TV3, TV4 and a stable of radio stations including Radio Live, More FM, The Rock and Mai. Australian private equity group Ironbridge bought MediaWorks through a leveraged buyout in 2007 from 70 per cent owner Canada's CanWest Global and minority shareholders including Brook Asset Management in a deal valued at about NZ$790 million.

Aside from MediaWorks' senior loan, the company has a further $97 million of subordinated debt that's held by Halifax Bank of Scotland, Royal Bank of Scotland and Ironbridge. There's also a $24 million payment-in-kind facility managed by Goldman Sachs and the controversial $43 million "deferred spectrum payment" with the government for the renewal of radio licences for the 20 years to 2031.

MediaWorks is charged interest at 11.2 per cent per annum for the latter, which runs for 50 months.

If TPG were to get its way a major capital restructure, possibly a debt-for-equity swap, could be on the cards at MediaWorks with Ironbridge potentially facing the crystalisation of a complete loss on its shareholding. MediaWorks is, however, said to be trading to budget with Ironbridge approving around $20 million investment in programming next year.

TPG already in the media business

TPG's vast array of investments includes Univision Communications, a Spanish language media company in the United States with TV, radio, music and internet operations.

TPG has been operating in Australasia for about 10 years and tried to buy Carter Holt Harvey in 2005 but was outbid by Graeme Hart. It also launched a takeover bid for casino operator SkyCity in 2007 that this was ultimately curtailed by the global financial crisis. TPG's website says it has about US$48 billion of capital under management and specialises in "recognising value, or the potential for value, where others do not."

MediaWorks was due to have a new banking covenant introduced on November 30, which is a leverage ratio, or borrowings relative to EBITDA. MediaWorks will also have a debt service cover ratio, or cashflow relative to interest and debt repayments, covenant added from February 28 next year. Already in place are three covenants - an interest cover ratio, or EBITDA relative to interest, a minimum EBITDA ratio, and a net capital expenditure limit. See more on this here.

Goldman Sachs a player too

A capital restructure in late 2009 saw $70 million of equity tipped into MediaWorks, with GR Media Holdings emerging as MediaWorks' parent company in place of HT Media Holdings. The $70 million was used to repay debt, reset fixed interest rate swaps and provide ongoing liquidity.

As part of the restructure, Goldman Sachs converted debt into equity and Companies Office records now show the investment bank with a 7.8 per cent stake in GR Media Holdings. Other GR Media shareholders, who weren't previously listed as HT Media shareholders, include the BNZ, the Royal Bank of Scotland Plc and RBS (New Zealand) Ltd, Uberior Investments which is the private equity arm of Halifax Bank of Scotland, all with 4.2 per cent stakes. Both Royal Bank of Scotland and Lloyds subsidiary Halifax Bank of Scotland have the British government as their major shareholder.

It appears that these banks, like Goldman Sachs, converted debt in MediaWorks into equity in the capital restructure.


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