Chances are rising that PBL Media will be in the hands of its bankers if it doesn’t receive an urgent capital injection.

News that James Packer and his former CEO, John Alexander, bailed from the PBL Media board today and yet another statement from Packer’s Consolidated Media about how it isn’t responsible for any contribution to the refinancing of PBL both suggest that the media group’s finances are approaching collapse.

Cons Media had the statement out on the ASX website before trading started at 10am. When it did, the shares fell from $2.02 to a low $1.825. They then bounced to $1.90.

CVC, owner of 75% of PBL Media, is reported in the media as wanting $300 million, including $75 million from Cons Media, to relieve the pressures on the company, its biggest investment in Australia.

According to the Australian Financial Review, Cons Media was to issue another statement this morning denying any need to help refinance PBL Media, and that Messrs Packer and Alexander will leave the PBL board immediately:

Consolidated Media Holdings Limited announces today that, further to its ASX announcement of 23 October 2008, the CMH Board has resolved that CMH does not intend to contribute any further funding to PBL Media.

Accordingly, any additional capital contribution to PBL Media by its major shareholder Red Earth Holdings B.V. an entity owned by funds advised by CVC Asia Pacific and CVC Capital Partners (CVC) will dilute CMH’s shareholding.

Mr James Packer and Mr John Alexander, and their alternates Mr Chris Anderson and Mr Martin Dalgleish, have resigned today with immediate effect from the PBL Media group’s boards – PBL Media Holdings Pty Limited, PBL Media Finance Holdings Pty Limited and PBL Media Group Limited. CMH no longer has any board representatives on the boards of the PBL Media group,” CMH said in its statement.

That was after the story in the AFR claimed that Cons Media would announce such a move this morning. It was the second announcement in a week from Cons Media that it would not help recapitalise PBL Media and its $4.2 billion of debt.

There are distinct signs in the two statements and the decisions to leave the board (the AFR has a direct line into Packer’s office) are an attempt to get as far away from the train crash that is PBL Media. But Packer’s Cons Press group controls 38% of Cons Media and is still on the hook, should CVC launch any sort of legal action.

There’s no sign of any action, but to issue two statements in three days and for the senior members of the board to step down from PBL is a sign of legal nerves. The announcement and moves will come after a meeting of the Cons Media board today, according to the AFR (and according to Packer’s office). It’s an admission that Cons Media’s stake in PBL Media will be cut in half in any refinancing.

The AFR contained a highly favourable interview with Nine CEO, David Gyngell, although there appears not to have been any sort of discussion about how Nine is travelling financially.

The most important piece of information in the AFR story was the figure of $75 million as Cons Media’s contribution to the recapitalisation of PBL Media. With CVC’s 75% stake, that means $300 million is being sought. Cons Media’s stake will drop to around 10%-12% if CVC puts in more money.

The new capital is wanted by the end of the year because PBL Media has an estimated $120-$130 million in interest and principal due to its banks by the end of the year. It paid around $100 million in interest at the end of September and has yet to learn from its banks if they think PBL Media is still within the terms of the covenants on its $4.2 billion in debt.

For the new money to be sought now means there are fears that it is close to breaking its covenants with the banks and a capital boost is needed to keep them happy. That debt is chewing up just under $40 million a month in interest. The company earned $463 million in the year to June and lost money in the second half of 2008. People are still losing their jobs at Nine and at ACP magazines as the cost cutting goes on.

But you have to wonder whether the Nine Network has learned anything, despite all the problems of the past few years

The old, wasteful ways of Nine were shown in the re-signing of serial pest, Sam Newman for a reputed $3 million “long term” deal. The person doing the re-signing was Melbourne Nine boss, Jeff Browne, who helped his mate Eddie McGuire retire from the CEO’s role with a rock solid $4-$5 million contract.

Newman’s money could have employed some of the young people who have lost their jobs at ACP magazines, where profits have more than halved as ad revenues have slowed and circulations slumped for the likes of Women’s Day and The Australian Women’s Weekly. PBL also wasted $93 million buying Emap (and $250 million buying NBN) and then allowed a series of new magazines to be launched into an increasingly tough market.

The Newman re-signing is the wrong message to send to staff and viewers given the cuts being inflicted around the network, and on the associated ACP Magazines. Just how David Gyngell could countenance a $3 million re-signing of a person who has single-handedly caused female viewers to desert the AFL Footy Show, is one of the great mysteries of TV.

Peter Fray

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