The Ten Network has become the second major Australian media group to blink and approach the market for much needed new capital as advertising revenues fade and profits slump.

It will seek less than $100 million to try and improve its finances as advertising slows more sharply than thought. Ten’s move follows the refinancing by PBL Media late last year that has kept the Nine Network on air and out of the hands of receivers.

Ten’s plan will see its struggling Canadian parent, Canwest, diluted from its present stake of nearly 57% — it can’t afford to maintain that size stake in the company. The issue will raise at best $60-$80 million, if the recent discounts in similar issues are followed.

The Network’s first-half operating profits will be down by around 28% and revenues from its core TV business will be around 12% lower. It has also revealed write-offs and write-downs of nearly $150 million dollars in asset values in the group’s outdoor business (Eye Corp) and at the TV division. Ten will record a loss for the first half to the end of February given the size of the write-downs.

Canwest would have been required to fund nearly 57% of any issue: that it can’t tells us how stricken its finances must be and how close to the edge its financial strength must be. It has already warned for a second time in five months that it could breach loan covenants on some debts.

As an indication of the desperation for the money, Ten is making a non-underwritten issue of around 13% of its issued capital, and will have to accept a big discount from the last sale price of 93 cents.

Qantas, GPT and Lend Lease all had to take big price discounts in underwritten placements; the last company to go down this route was Transfield Services and it took the best part of two weeks to get the money arranged in late November, early December.

Ten said today that will sell up 120 million new shares to raise the funds.

Bruce Gordon’s WIN Corp won’t be happy. It’s facing huge losses on its Ten stake of around 13% and will be forced to cough up as much as $10 million to maintain its holding of 13%. That doesn’t sound much, but in the current climate, it’s a lot of money, especially when its still arguing with the Nine Network over this year’s affiliation agreement payments.

Peter Fray

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