Anyone watching the television ratings would think that Channel 9 is doing pretty well at the moment.
The network has had a string of hits this year, including The Voice, a successful relaunch of Big Brother, the London Olympics, and its news programs which often out rates that of its competitors.
So why is its holding company, Nine Entertainment, teetering on the edge of administration? Well you've got to remember Nine Entertainment, isn't just Channel 9's owner. It also owns or has interests in Ticketek, Sky News, ninemsn, Allphones Arena and ACP Magazines.
Well, it did own ACP, the publisher of the Australian Woman's Weekly, Woman's Day, TV Week and the like. It sold that for around $525million to a German company and deal seems to have been endorsed by Nine's lenders this week.
That's good for Nine because it reduces the amount of debt that it holds.
That's why Nine, is in so much trouble right now…its high debt levels. James Packer offloaded his major interests in the company at the peak of the sharemarket boom in 2007 to private equity firm CVC Asia Pacific.
As we all know, the GFC hit soon after. Advertising markets slowed, revenue dried up and most media companies suffered as a result. It was more of a problem for Nine and its new parent CVC.
On reflection, CVC paid too much for the assets, at $1.5billion plus around $4billion worth of debt.
The sale of ACP reduces Nine debt burden but it needs to refinance that debt before February, because right now it's having trouble paying it off with its existing conditions.
All that means, is that Nine needs to create a new deal with its lenders that will change the current terms of its debt payment obligations so that it becomes more affordable.
The problem is that its debt structure is quite complicated with a number of key investors obviously not wanting to lose out. But if no agreement is made in the next few weeks, then Nine could ultimately fall into the hands of administrators.
That's unless someone is interested in buying the company. There is speculation Bruce Gordon's WIN Network could be doing the numbers. Telstra confirmed that it did look at a Nine buy, but admitted the size of Nine's debt forced it to back down. Then there's James Packer.
Could he do what his father did in 1987? Sell the Nine Network, back then to Alan Bond, only to buy it back again at a bargain basement price years later? Time will tell, but it seems unlikely.
James Packer is offloading his other media interests, intending to accept News Corp's bid for his stake in Consolidated Media Holdings so he can focus more on his gambling operations.
