CVC Asia Pacific Ltd. will probably win the lender support it needs to restructure debt of PBL Media Ltd. as it seeks to protect the Australian magazine publisher from default, according to PBL's chief executive officer.
Lenders representing about 80 percent of PBL's mezzanine debt maturing in 2014 and 31 percent of its senior bank loans approved CVC's proposal, Ian Law said in a phone interview from Sydney today. The buyout company's plan to reduce debt by adding A$325 million ($210 million) in equity needs approval from all of PBL's mezzanine creditors and two-thirds of senior lenders by Dec. 10, he said.
``The initial response has been very strong. We're very optimistic that the recapitalization will go through,'' Law said. ``If the package is approved it will give us sufficient head room to trade through the bottom of the economic cycle and take the decisions that are necessary for the long-term interest of our business.''
PBL, which also owns Australia's Channel Nine television network, is struggling to repay debt from its 2006 buyout as the credit crunch pushes up interest costs and slowing economic growth cuts advertising revenue. Billionaire James Packer left the company's board last month after his Consolidated Media Holdings Ltd. refused to provide more capital as banks warned PBL was close to breaching covenants on its loans.
Packer sold half the media assets in Publishing & Broadcasting Ltd. to PBL in 2006, raising A$4.5 billion, and in June last year sold 25 percent of PBL to CVC to fund his push into gambling.
Buyout Loans
The buyout loans, maturing in 2013, pay interest of between 137.5 and 237.5 basis points more than the Australian bank bill swap rate, data compiled by Bloomberg show. Lenders include Credit Suisse Group AG, UBS AG, ABN Amro Holding NV, Calyon, ING Groep NV, WestLB AG and Bank of America Corp. A basis point is 0.01 percentage point.
``Banks will need to take a hit if they let PBL Media go,'' said Vicky Melbourne, a credit analyst with Fitch Ratings in Sydney. ``If you step back and look at PBL Media's assets, they are quality assets generating strong cash flows. The company's just got too much debt at the moment and it's a difficult time.''
PBL has A$4.2 billion of debt outstanding, including A$3.6 billion of bank loans and A$600 million of mezzanine debt, according to Law. CVC's equity injection and cash from PBL would help reduce the debt to about A$3.8 billion.
Though the debt restructuring plan includes changes to financial covenants, creditors agreed PBL won't have to pay higher interest charges, he said
