CVC and Goldman Sachs are reported to have proposed a debt-for-equity swap for CVC’s stake in Nine Entertainment, a move that would wipe out the London-based private equity firm’s equity and cede control to the debt-stricken company’s lenders.
A potential deal would see Nine Entertainment fall into the hands of the company’s lenders, which are understood to be owed about A$2.7bn ($2.8bn), Reuters reported on Monday.
Apollo Global Management and Oaktree Capital own about A$1bn of the debt, while hedge funds including Och-Ziff Capital Management own a further A$1bn.
Goldman Sachs owns A$975m in mezzanine debt, which is due to be repaid in 2014, the report said.
The move would see senior lenders take a 70 per cent equity stake in the company, with the remaining 30 per cent held by Goldman Sachs, the report added.
The deal was put to the board and senior lenders at the weekend, and values the company at about A$2.6bn, or about 10-times forward earnings.
CVC is hoping to reach an agreement by mid-November, the report added.
The move would also result in an overall A$1.8bn loss on CVC’s initial equity investment, representing the biggest ever loss on a single buyout deal in Asia.
Nine Entertainment’s woes are seen as a significant contributing factor to CVC’s recent withdrawal from Australia, as it comes to grips with large losses from its third Asia fund and a lack of debt financing to support deals.
The firm has ceased doing new deals and is in the process of cutting its Australian employee base following huge losses incurred from its investment in Nine Entertainment, which could result in losses of more than $2bn.
Three partners – equivalent to half of the firm’s dealmaking team in Australia – left CVC to work for other financial services businesses in December, soon after the firm told them it would not be making any future investments.
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