PBL Media’s banks appear to have agreed to bail it out by agreeing to the recap plans put forward by CVC, the private equity group.

A report on the Sydney Morning Herald website around 12.30 pm said:

PBL Media is believed to have got the green light from its banks for a $445 million recapitalisation plan designed to save it from collapsing under its $4.2 billion debt mountain.

The Herald understands that 80% of the lenders of its $3.86 billion in senior debt endorsed the recapitalisation proposal by a midnight deadline last night. The company needed approval from two-thirds of its more than 70 lenders.

Judging by reports around town in Sydney, it was a down to the wire negotiation. helping PBL Media was the parallel but unconnected talks between Centro Properties and Centro Retail over a big extension of their $4 billion plus in loan facilities held by Australian and US banks.

Allowing both to go to the wall would have added well over $A8 billion in non performing debt to a string of banks here and around the world, including the Commonwealth, the NAB, Goldman Sachs and St George.

CVC was negotiating with its bankers to inject a further $335 million of cash in return for a relaxation of covenants to a minimum 2009 (June 30) EBITDA of $375 million (from $480 million currently) and to $390 million in 2010 from the current $525 million.

Around 7.25% of Consolidated Media changed hands late yesterday on the ASX and it is thought that was a position of shares and derivatives built up by a buyer from the US. The sale is interesting coming before the expiry of the deadline for bank votes on the refinancing offer. It’s been reported the sale was by a US hedge fund. They shares are understood to have gone to three local institutions. one of those is Perpetual which had 8.89% in late November and has been a big buyer of Cons Media shares in recent months.

The Kerry Stokes-controlled Seven Network is believed to be still on its 4.8%, which the company and Mr Strokes haven’t admitted to, but everyone knows about.

Reports yesterday suggested that lead banker Goldman Sachs was becoming unhappy and that Australian banks led by NAB were unimpressed by the suggested rescue plan. Some banks didn’t like the way James Packer’s moved to distance himself by resigning from the Board and refusing to put more money into the recap deal.

A problem for PBL Media is the way the Nine Network (and increasingly ACP Magazines) are slowing repayment of supplier debt. Its late paying invoices, or not at all in some small cases and it is running 180 days (six months) behind in all but the most important cases.

Brokers Merrill Lynch said in a note to client yesterday that if the new profit targets in the loan covenants were approved by the banks, then PBL Media would, according to its figuring, be OK next year, but in trouble in 2010.

“If accepted, PBL Media would be ok in FY09 (Merrill Lynch estimate for EBITDA $418m), however FY10 could still see even the more relaxed covenants breached (Merrill Lynch estimate, $380m), in our view.”

“CVC has invested $5.2bn in PBL Media: $982m of capital and $3.75bn of debt for a 50% stake in Oct ‘06 and $515m in June ‘07 for a further 25% stake. If, and this is by no means a certainty, PBL Media’s banks agree to more lenient covenants, we still believe there is a risk CVC would have to put in additional equity above $335m.

“We forecast PBL Media will generate EBITDA of $418m in FY09 and $380m in FY10 (compared to $508m in FY08A), driven largely by:

“Nine network – Revenue declining by -5% in FY09 and -4% in FY10 (in line with our TV ad market decline forecasts);

“ACP Magazines– Revenue falling by -5% in FY09 and -4% in FY10 (compared to our Magazines ad market decline forecasts of -6% and -5%, as ACP’s revenue is partly boosted by new launches);

“However we are concerned that on our estimates PBL Media will only just meet its interest costs of $408m in FY09 (EBITDA $418m) but fail to do so in FY10, with interest costs of $398m and EBITDA of $380m. Note we assume a cost of debt of 9.6% in FY09 and 9.0% in FY10 with average debt levels of $4.27bn and $4.42bn respectively.”