Insolvent 13 June? Really?
“net asset deficiency – No”
“no evidence of chronic arrears in creditor payments”
Look how close the unaudited working capital ratio was to 1.00:
“– 31/03/17 Management Accounts ratio: 0.96 position: ($10.4m)
– 30/06/17 Management Accounts ratio: 0.95 position: ($14.3m)”
As we knew, the significant drop from FY16 was due to:
“the reclassification of the Facility from a non-current liability to a current liability”.
Yet the facility was open to use until 23 Dec and prospects for refi were good:
“12 June 2017 (Public Holiday)
Directors note that there is no event of default and therefore the Facility remains available….
Moelis updated the board, advising that the Group had good prospects for refinancing its existing finance facility, on the basis that the Group achieved success in its transformation program, renegotiation of the US Studio agreements and license fee relief Moelis advised it had received strong engagement from parties approached including expressions of interest”
“13 June 2017
At the date of appointment of the Administrators, the drawn balance of the Facility was $96.8m (including capitalised interest of $6.8m) with headroom of $103m available for use…..The Ten Group also had cash reserves at 30 June 2017 of $21.8m and receivables of $120.5m”
Ten were not forecasting to max out the facility:
“Based on the Ten Group cash flow forecast to 31 August 2017 (as at February 2017), Ten Group was forecast to operate within the facility limit, with peak debt of $173.1 million” in mid-August.
"Cash flow forecasts through to the date of maturity of the Facility on 23 December 2017 reflect peak funding requirements of approximately $180m in August/September 2017".
with the peak due to a known seasonality ie improves afterward:
“increase in intra-month drawn debt from $46m to $172m to fund seasonal peak in production costs”
And the big studios were owed bugger all at the time:
“The creditors’ balance as at 13 June 2017 in relation to CBS was $6.9 million”
“The [Fox] creditors’ balance as at 13 June 2017 in relation to Fox was $6.9 million”
Reads like Directors cr@pped themselves after receiving the 12 June 2017 letter from Illyria and Birketu, which advised they:
“may seek damages from board members personally if board members failed to prevent drawdowns if Illyria and Birketu were damaged by those actions”.
Fox could not be reached on 12 and 13 June to finalise proposed new programming terms:
“The Board had requested Fox to confirm their acceptance of the proposed new terms by 8am on 13 June 2017. This confirmation was not received by that date. … Directors agree to wait 24 hours before considering further action…. No response received overnight from remaining Studio to proposed terms"
The day before appointment of Administrators, Ten paid up the insurance bill. Hopefully it includes Directors & Officers insurance:
“payments made on 13 June 2017 which may constitute unfair preference payments as follows: …– $970,931.17 for insurance renewal premiums for certain insurance policies for the year ended 31 May 2018”
Looks like Administrators reached their "preliminary view" on solvency and conclusions about likely success of a s444GA share transfer without yet having the benefit of the full valuation report:
“Based on the financial position of the Ten Group companies, we believe there are reasonable grounds to expect the Court will grant the relief sought, so that the transfer of shares can be made. However, ultimately this is a decision for the Court”.
“The s444GA provision ensures that existing shareholders are afforded a level of protection and an opportunity to be heard, through the court process, while allowing creditors, or others, to acquire the equity interests when it is not unfair to do so (such as the shares have no value).”
“The Administrators and Receivers have jointly appointed an independent expert to provide a report valuing the shares in Holdings…..In late July 2017, KPMG was jointly appointed by the Administrators and Receivers to prepare an independent expert’s report”
KPMG seems ok amongst big 4 firms - obviously they all do work all over the place, though I believe EY audits NewsCorp and PwC audits CBS.
As you would expect, with the CBS deal being binding, KM and PPB are no longer allowed to seek rival bids:
“solicit, sponsor, endorse or otherwise take any action to implement or be involved in any transaction which is inconsistent with them using all reasonable efforts to complete the Transaction.”
However, they could legally deal with a new rival bid:
“the Administrators will not be in breach of this obligation to the extent to which they comply with their legal obligations in respect of an unsolicited, alternative proposal involving a deed of company arrangement”
Bring on the valuation report! and the Federal Court hearing “at which shareholders may appear”
TEN Price at posting:
16.0¢ Sentiment: None Disclosure: Held
