As expected, shares in the Ten Network plunged this morning after it failed to get any takers for its search for a spare $90 million.

Ten’s attempt to raise up to $90 million in an issue of 120 million shares at 75 cents collapsed late yesterday when it was met with a wall of closed cheque books.

This morning the shares plunged almost 25% at the opening to a low of 70 cents, from the close of 93 cents on Tuesday. They then recovered to 75 cents, to be off more than 18% (the gloom also took Fairfax back down under $1 this morning to 98.5 cents).

The debacle raises more questions than the announcement answers.

With the company on the nose with every major broker, including its book builder Citigroup (which values the company at 46 cents a share against the suggested issue price of 75 cents) why proceed with an issue that’s bound to fall on its face?

Citi’s valuation will fall if the issue is successful: “We currently value Ten at $0.46 using DCF. Assuming a 120m share issue we value Ten at $0.41c per share.”

Those sorts of valuations have been around for a while — if Citi got any sort of fee for this abortive issue, then it was money for jam from a blind man.

Three phone calls — to Goldman Sachs JBWere, Credit Suisse and then one to big fund manager, 452 Capital — would have saved some trouble. All the Ten management needed to ask whether there was any chance of an issue getting up at 75 cents. The answer would have been short and to the point — nope.

Instead Ten went down a route that has embarrassed it.

Ten chairman Nick Falloon said the company is “well capitalised”. Well, if it is, why the approach to the market? Where was the sense, why not do the sounding out before the announcement? Or did Citi reckon the money was there?

It has upset Bruce Gordon at WIN who has an entry price of around $3 a share on his 13% and is facing quite painful losses. The Ten management’s fumble has just cost him another 18% off the value of his holding.

The Canadian parent, Canwest, couldn’t afford to contribute $51 million or so to keep up its 56.6% stake in Ten.

Ten was prevented from asking for more money because Canwest can’t let its holding in Ten be diluted any further. To allow that would see it forced to deconsolidate Ten from its accounts in Canada, which would in turn trigger breaches of its loan covenants. Canwest has already warned that it could breach those covenants in other areas, such as interest cover and cashflow.

Some analysts wonder if the falling value of Ten in recent months, and especially this morning, will put further pressure on Canwest as it negotiates with its banks on its latest potential breaching of its loan covenants.

Could this be a reverse squeeze on Canwest, its board and its controlling Asper family, by the Ten board and managers seeking freedom?

The Aspers can vote their shares to remove the Ten board, but they couldn’t find anyone to run it. The Aspers are broke and can’t afford to take over Ten, nor can they afford to sell it without the greenlight from its banks. Any move against the Ten board would devalue the already lowered value of the holding even more.

Crikey has raised the idea of the old “gang of Ten” saviours, led by Jack Cowin and John Singleton. Will Robert Whyte, the former Kerry Packer mate, play as well?

Last night wasn’t a good night for Ten in the nightly ratings battle with Seven and Nine. It wasn’t a good day for the corporate side either.

Peter Fray

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