The network was widely expected to enter administration today, after it emerged yesterday that Ten shareholders Lachlan Murdoch, Bruce Gordon and James Packer decided against guaranteeing a new $250 million loan to replace the existing $200 million overdraft, which needs to be repaid to Commonwealth Bank in December.
In a statement to the ASX on Wednesday, Ten announced KordaMentha had been appointed as voluntary administrators. Illyria, Mr Murdoch’s private investment vehicle, holds 7.5 per cent of Ten shares, while Mr Gordon’s Birketu controls 15 per cent. Mr Packer is understood to be keen to sell his 7.7 per cent stake.
“This decision follows correspondence received from Illyria and Birketu over the weekend which left the directors with no choice but to appoint administrators,” Ten said in a statement.
“The administrators have advised the company that they will work closely with management, employees, suppliers and content partners while they undertake a financial and operational assessment of the business. During this period, the administrators intend to continue operations as much as possible on a business-as-usual basis.
“The directors of Ten regret very much that these circumstances have come to pass. They wish to take this opportunity to thank all Ten employees and contractors for their commitment and enthusiasm for Ten’s programs and business.
“In particular, they would like to express their sincere gratitude, respect and admiration for Ten’s leadership team, who have achieved everything the board has asked them to do over the past few years in very challenging circumstances. They wish Ten and its management … all success in the future as the administrators look to the potential sale or recapitalisation of the business.”
But fans of The Project, MasterChef, The Bachelor and can rest easy. “Today’s announcement will have no impact on our programming, at all. It is business as usual,” a spokesman said.
Experts say cashed-up private equity firms and Australian billionaires will be likely buyers of the business. Media analyst Steve Allen told The Daily Telegraph Ten’s shares collectively are worth about $60 million, which is cheap for a television licence in Australia.
“I would have thought in the long run $60 million for a free-to-air TV licence in Australia with a bunch of programming commitments and a couple of contracts to be renegotiated could mean the network survives profitably and would be very tempting [for a buyer],” he said.
Ten said the decision came despite making significant progress to improve future earnings through cost cutting, renegotiation of onerous programming contracts with US studios CBS and 21st Century Fox — which have cost the network an estimated $900 million over the past six years — and a reduction in government licence fees.
It said the company was expected to save between $50 million and $90 million a year through its cost-cutting program between FY18 and FY19. Savings from the reduction in licence fees are expected to be in the order of $22 million this financial year and $12 million in FY18.
“In relation to the renegotiation of programming contracts, the company has agreed in principle the vast majority of the commercial terms of replacement volume content supply agreements with its US studio partners, Fox and CBS, although final terms have not yet been formally agreed,” Ten said.
“The effect of these replacement content agreements, if finalised and implemented, would be to reduce by approximately 50 per cent the group’s future liabilities for US content, while still allowing Ten access to the best productions of those studios over the medium term.”
At its recent half-year results, Ten admitted it may not be able to carry on as a going concern after posting a $232.2 million loss. Despite a number of hit shows, the third-placed free-to-air network has struggled to bring in advertising revenue. The broader TV industry faces pressure from streaming services like Netflix, Stan and Amazon Prime, and from online advertising giants Facebook and Google.