The Inland Revenue Department has filed applications to liquidate former MediaWorks companies over a disputed $22.1 million relating to past financing arrangements that have since been deemed avoidance in the courts.
The receivers of Ex-RW and Ex-TVW, previously known as RadioWorks and TVWorks, will work with the appointed liquidator after the sale of the business to its lenders fell short of raising funds to pay the tax bill, KordaMentha's Brendon Gibson said in a statement. The IRD's application is based on a disputed debt relating to the reassessment of tax returns between 2000 and 2004, and is still before the courts, he said.
"As we signalled at the outset, all those who had supplied goods and services to the companies before receivership have been paid what they were due. This includes all tax and GST payments owed to the IRD," Gibson said. "However, realisations from the sale of the business have not been sufficient to allow payment of the disputed debt."
MediaWorks was tipped into receivership in June to oversee a restructuring plan where the broadcaster's assets would be placed in a new entity owned by the debt-holders. The transaction put a value of $285 million on MediaWorks, according to the Overseas Investment Office's August approval of the deal.
At the time, KordaMentha's Michael Stiassny said the tax debt would likely be left with the empty shell companies.
MediaWorks' former holding company, GR Media Holdings, took a provision of $22.096 million in its 2012 financial accounts to recognise a potential settlement with the tax department over its use of optional convertible notes.
The media company was one of a group of firms targeted by the IRD for its use of the instruments, which have the hallmarks of both debt and equity, where deductions were claimed on interest in New Zealand weren't offset by income tax in Australia.
The tax department has successfully argued in a case against Alesco Corp that the structure was structured purely to minimise tax.
US hedge fund Oaktree Capital upped its stake in MediaWorks this month to 43 per cent, buying Rabobank's stake for an undisclosed sum. The date of the transaction was the same day the media group's lenders completed their recapitalisation of MediaWorks, which reduced the company's debt levels to about $100 million from more than $700 million beforehand.