Lenders of Nine Entertainment television network, owned by CVC Capital Partners Ltd, agreed to swap more than $3 billion in debt for equity, giving U.S. hedge funds control of one of Australia's best-known media firms.
The deal will wipe out CVC's A$1.8 billion ($1.85 billion) equity investment in Nine, marking the largest-ever loss on a single private-equity deal in Asia, and one of the biggest globally.
Nine owed hedge funds, led by Oaktree Capital and Apollo Global Management, about A$2.2 billion in senior debt. The hedge funds will now end up with 95.5 percent of the equity in the firm, the broadcaster said in a statement on Wednesday.
Mezzanine debt holders led by funds managed by Goldman Sachs that are owed A$975 million will receive the remaining 4.5 percent, Nine added.
This is an outstanding outcome for all stakeholders, Nine's Chairman Peter Bush said, confirming earlier reports. The business has great momentum and strong cash flow, and now it will have the strongest balance sheet in the industry.
The deal, which leaves Nine debt-free and saves it from sliding into receivership, will be lodged with regulators in late November and implemented over the next three months, the firm said.
CVC acquired Nine for A$5.3 billion in two deals at the peak of the buyout boom in 2006-2008, of which A$1.8 billion came from its own pocket and the rest through cheap debt financing.
When the global financial crisis hit, advertising revenues collapsed across the media sector, slashing profits at Nine and rival TV networks.
The funds that own Nine's debts acquired them on the secondary market.
Nine's deal with its creditors follows months of negotiations between CVC, hedge fund lenders and Goldman.
Goldman originally proposed swapping its second-tier mezzanine debt for about 30 percent of the equity in Nine worth some A$400 million.
When the hedge funds rejected that, Nine management offered a compromise in which Goldman would receive about 7.5 percent.
The 4.5 percent stake that the mezzanine lenders received is worth just over A$100 million, based on an agreed enterprise value of A$2.3 billion.
It's been a long and often tortuous process, said Nine's Chief Executive David Gyngell.