Australis Given Breathing Space By Packer
The Age
Friday April 19, 1996
Sydney.
The struggling satellite and microwave broadcaster Australis Media has gained a six-month reprieve. Its complex $200 million refinancing came after a shock last-minute intervention in negotiations by Kerry Packer's Publishing and Broadcasting.
PBL would end up with 11 per cent of Australis and the United States cable group Lenfest Communications would lift its 33 per cent stake to 38 per cent if all the options in the refinancing deal were exercised.
Analysts were divided on the impact the refinancing would have on Australis's shares, which last traded at 57 cents four weeks ago, when they relist on Monday.
Mr Vince Pepe, of Burdett Buckeridge and Young, valued the shares at about 88 cents, based on back-of-the-envelope calculations, but Mr Adam Spowers, of James Capel Australia, said the upside would be limited because of the large number of cheap options.
PBL's intervention this week enabled Australis to spurn the $250 million offer of Mr Rupert Murdoch's News Corp to buy out Australis's profit margin on its lucrative 25-year program supply deal with Foxtel, News's cable venture with Telstra.
News and Foxtel executives had promoted this offer as Australis's only hope for survival. They pulled out of negotiations for a $200 million refinancing two weeks ago, arguing on the basis of analysis by Turnbull and Partners that Australis would need at least $750 million pumped in before it broke even.
But sources said the price was the minimum present value of the profit margin to Australis.
Foxtel will pay Australis a minimum of $150 million a year - and probably twice that - from 2001 for movie and general programming under the programming deal. Australis's profit margin will be at least $30 million, rising in proportion with increased subscribers.
Australis's chairman, Mr Rodney Price, told Foxtel's London- based director and chief negotiator Mr Sam Chisholm yesterday by phone the offer was unacceptable and Australis would instead accept a refinancing offer from PBL, Lenfest, another US cable group UIH, Sir Ron Brierley's Guinness Peat Group and JP Morgan.
``For each subscriber that Foxtel puts on, it's costing an arm and a leg, and they just missed an opportunity to get that cost down, I think by playing the game far too hard," one analyst said.
PBL, Lenfest, UIH, GPG and JP Morgan have agreed to provide Australis with guarantees of $162 million, with PBL contributing $40 million. Lenfest has extended an existing $25 million loan and JP Morgan has agreed to pump in $13 million by subscribing for 23.5 million shares or debentures at 54.5 cents each.
Australis, which has been shedding cash at $10 million a week because of heavy subsidies on satellite and microwave installations, said this would cover its working capital requirements for six months while it arranged long-term finance.
Its new backers get an immediate 32.9 million options over Australis shares or debentures exercisable at 20 cents apiece until December 1988 and, subject to shareholder approval, another 41 million similar options. These would amount to 13 per cent of Australis capital.
The investors may also convert their guarantees into interest- free loans after six months, with the right to convert their loans to shares or debentures at 54.5 cents each. This is just under the price at which Australis shares last traded before they were suspended four weeks ago pending the resolution of the refinancing negotiations, but the effective price would be higher because the investors would forgo interest on their loans.
© 1996 The Age
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