Tycoons withdraw support for Ten Network’s credit facility

SYDNEY: Ten Network Holdings Ltd, the broadcaster of Australia’s longestrunning drama series Neighbours, said yesterday that two local media magnates had declined to extend their support for a $150 million debt guarantee past 2017 — a move that increases the risk of the troubled broadcaster seeking receivership.

Coming under administration could, however, help Ten Network by allowing it to freeze and then renegotiate expensive licensing contracts with US studios for shows such as NCIS and CSI: Crime Scene Investigation.

Broadcasters and Ten in particular have suffered large losses and are scrambling to cut costs as advertisers follow viewers who have turned to streaming services like Netflix Inc and Amazon.com Inc’s Amazon Prime.

“Going into receivership, they can be very tough in their renegotiation, and more realistic,” said Steve Allen, managing director of Essence Media.

“The programmes and the ratings that they’re getting for the costs involved is a mismatch; it wasn’t five years ago, but it is now.”

Ten had flagged in April that it might collapse if it did not extend or secure a new borrowing arrangement, adding that it was looking to increase the size of its current facility from A$200 million (US$150 million) to A$250 million.

The current facility is backed by three Australian tycoons. Ten said yesterday that it had been informed that two of them, News Corp co-chairman Lachlan Murdoch and regional TV owner Bruce Gordon would not be extending their support beyond Dec 23, 2017.

It was not immediately clear if Crown Resorts Limited boss James Packer had also withdrawn his support. A representative for Packer was not immediately available for comment.

Ten’s situation puts pressure on the Australian government to push through a deregulation package that would make it easier for local traditional media companies to buy each other.

Lachlan Murdoch owns 7.7% of Ten and News Corp-controlled local cable TV firm Foxtel owns another 14%. Analysts have said they expect Foxtel would be interested in buying out Ten if the deregulation package went through.

The package has wide support in the media industry but some independent senators, who control the Australian upper house, have said they are concerned the diversity of local content could suffer.

While receivership could be a good opportunity for Ten to break onerous contracts, it is not without risk as the network could lose some good shows, said Laurie Fitzgerald, a business recovery specialist at corporate adviser William Buck.

“The Master-Chef group ... they could just turn around to Ten and say: you’ve broken our contract, we’ll shop it around, we might just see what Nine will offer us,” said Fitzgerald.

Ten also said it had asked to have its shares suspended for two days while it considers its position in light of the stance taken by its backers.

Up to Friday’s close, Ten’s shares had plunged 83% this year, giving it a market value of A$58 million. In 2014, it rejected a A$680 million (US$588 million) takeover bid from Time Warner Inc.