John Cleese once made the phrase “don’t mention the war” memorable in a Fawlty Towers episode involving German tourists. From then on it has become synonymous with avoiding an unpleasant subject, as CVC Capital Partners did this week when it revealed that its long-time chairman Michael Smith was retiring.

There was nary a mention from Smith or CVC Capital of its Nine investment, which has turned out to be one of the biggest disasters private equity has had globally in its existence. The loss will be close to $US2.7 billion for its funds.

Nine is still listed on the CVC website as part of its portfolio. Even though the deal to convert all that debt to equity has seen CVC lose Nine Entertainment to US hedge funds Oaktree and Apollo, it hasn’t gone through yet as the final structures and other details are nailed down. The list of news announcements, including asset sales, on the CVC website has yet to carry a statement confirming the change of control at Nine.

One of the final details still to be ironed out is the final level of debt Nine will carry, which will be between $500 million and $800 million. This will be contrary to statements from Nine boss David Gyngell and the company last month that Nine will be debt free. Nine Entertainment released a statement after the sale was finalised in Sydney last month which said in part:

”As soon as the restructure is effected, all the existing senior and mezzanine debt will be converted to equity and the Group will have no debt. In exchange for cancellation of existing senior and mezzanine debt, senior lenders will collectively receive 95.5% of the equity in the Group with mezzanine lenders receiving the remaining 4.5% … Full details of the restructure will be contained in the scheme booklets which are expected to be lodged with ASIC in late November.”

That “debt free” status looks like being a temporary situation, judging by media reports this week about the negotiations over how much debt the revamped Nine Entertainment will be carrying once the change of control happens.

There are no free lunches with hedge funds, just as there are no free lunches with private equity. They all extract their cash, one way or another.