CVC: No urgent need to refinance Nine

The private equity firm has denied its investment in the Australian media group is in trouble, but reportedly asked its creditors to respond to a new plan on refinancing by Christmas.

CVC Capital Partners issued a statement saying it is not facing what news reports have claimed will be one of the biggest losses in private equity history.

After failed talks with creditors over the refinancing of A$2.6 billion (€1.97 billion; $2.6 billion) in senior debt in Nine Entertainment, the private equity firm said it had “no current requirement to refinance”. 

CVC said in the statement that Nine’s senior debt only matures in February 2013 and the firm “has proactively commenced discussions with its lenders regarding refinancing options”. In addition, the firm said Nine is not in breach of any of its financial covenants or in default under any of its banking agreements.

Last month, CVC met with Nine’s lenders to reportedly ask for a two-and-a-half year extension on the A$2.6 billion senior debt package. Local media reported at the time that lenders were expected to reject the proposal. 

Over the past week, according to Reuters, some lenders have sold debt to hedge funds and CVC shelved the plan for an extension. US and Australian hedge funds, including Oaktree Capital, Anchorage Advisors, Och-Ziff and Apollo Global Management reportedly control more than 40 percent of the debt and are looking to take control of Nine.

Should CVC lose control of Nine and if  it is forced to write down its investment, it would reportedly face a paper equity loss of $2.2 billion. The potential loss would be one of the biggest ever sustained by a buyout firm.

At press time, Reuters reported that CVC has asked its creditors to respond by December 25 to a new plan on the refinancing which involves splitting the debt into two classes – one tranche allocated to banks and the other allocated to hedge funds.

However, hedge funds are expected to reject the proposal as well.

“The hedge fund guys want the company. They don’t want some deal, they don’t want to accept an extension. That’s why they bought in,” an analyst was quoted as saying in the report.

CVC in Hong Kong declined to comment and CVC in Australia did not return calls requesting information by press time.

In the statement from the firm, CVC also said the cost of the investment in Nine represents less than 5 percent of CVC’s current private equity funds under management. It was made through four separate CVC funds.

“The overall performance of the CVC Funds continues to be top quartile after fully reflecting the latest financial position of Nine Entertainment Co,” it stated.