Korda Mentha held 50 meetings with Network Ten's management, directors, advisers and shareholder guarantors in recent months in a bid to help the broadcaster stay on its feet, according to a letter sent to employees on Thursday.Â
The restructure firm was first engaged in late February after being approached by Ten's lawyers, Gilbert + Tobin, to assess Ten's financial position and prepare an administration plan "in the event the negotiations to reduce future studio commitments and other costs were not successful". Â
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Joking that the power had gone off at Network Ten, Pete Helliar comments on the financial woes of the company, while fix-up advice comes from Twitter.
And now the broadcaster has been placed into administration and staff advised they cannot place any orders for goods or services without permission from Korda Mentha.Â
The board put Ten shares into a trading halt on Tuesday morning (after the long weekend) and by Wednesday morning had appointed administrators. Â
![Network Ten shareholders and loan guarantors Lachlan Murdoch (left) and James Packer.](http://web.archive.org./web/20170620201844im_/https://www.fairfaxstatic.com.au/content/dam/images/g/t/z/1/f/6/image.related.articleLeadwide.620x349.gwsjsz.png/1497674016862.jpg)
"The decision follows correspondence received from Illyria and Birketu over the weekend which left the directors with no choice but to appoint administrators," the company informed the market. Â
Illyria Nominees and Birketu are the respective investment vehicles of billionaire shareholders Lachlan Murdoch and Bruce Gordon, who told the board on Friday evening they would no longer guarantee a key loan, putting the company at risk of insolvency.
According to correspondence published in The Australian Financial Review, Illyria Nominees and Birketu then reminded directors in a letter on Monday evening they would be in breach of their directors' duty to incur debt while insolvent.Â
"Any drawdown under the existing facility will amount to the incurring of a debt regardless of its purpose," the letter states. Â
![Ten chairman David Gordon](http://web.archive.org./web/20170620201844im_/https://www.fairfaxstatic.com.au/content/dam/images/g/i/o/p/v/d/image.related.articleLeadwide.620x349.gwsjsz.png/1497674016862.jpg)
"As a company such as Ten approaches insolvency, its directors also have an overriding duty to act in the best interest of the creditors, which includes Birketu and Illyria."Â
Without access to the $200 million facility provided by the Commonwealth Bank and guaranteed by Gordon, Murdoch and fellow shareholder James Packer, the administrators may run out of options. They have scheduled a creditors meeting for Monday, June 26, in Sydney, and will examine the options. Â
Administrator with PKF, Glenn Franklin, said shareholders' interests were suspended during the administration process. The direction of the administration process would be decided by the largest creditors representing the bulk of the debt.Â
"If they are at all restricted in terms of cash [the administrators] will have to fast-track the process," Mr Franklin said.Â
"You would do your best to put the network on the market and try to find a buyer."Â
He suspects the administrators will seek to extend the process, given the complexity of Ten's situation. Â
"It wouldn't surprise me given the scale of this that [Korda Mentha] would make an urgent application to court. What they will be trying to do is to extend the convening period for administration."Â
This could extend the time it takes to decide what to do with Ten from 20 business days into months, in which time Australia's media ownership laws may be changed.Â
In late April Ten's accounts showed it still had access to $154.5 million of the $200 million loan. It owed $5.4 million interest on the loan, and owed the directors $29 million in guarantor fees.Â
"The facility is expected to be drawn to higher levels prior to the expiry date," the director's report noted.Â
Last time Ten went into administration was 1990 in the midst of the recession that Australia "had to have" and soaring interest rates, when businesses around the country either disappeared or were forced to reinvent themselves.Â
"TV advertising was very tied to economic performance and strong employment," says Mark Westfield, author of The Gatekeepers, a history of Australia's media sector.Â
"The internet is probably the equivalent of a recession for the networks. It has the impact of the recession of the 1990s in terms of affecting revenues."Â
On air, Ten's presenters have spoken about a quick and painless process, while also urging Parliament to pass the media reform bills.Â
The host of The Project, Carrie Bickmore, confidently told viewers on Wednesday evening that "administrators say they are not looking to liquidate the company. Instead they will try to refinance and relist within 60 days." News reporter Kimberley Soekov made a similar statement in her report.Â
A spokesman for Network Ten says these facts were widely reported and staff did not receive any instructions.Â
Meanwhile, host of morning show Studio 10, Sarah Harris, on Thursday morning echoed comments of senior media executives urging politicians to vote in favour of reform.Â
"These reforms are crucial to providing a level playing field against internet companies offshore and who are not burdened by restrictive laws that were brought into effect before the age of the internet," Harris told viewers of the chat show.Â
She then called directly on Senator Pauline Hanson and Opposition Leader Bill Shorten to "reconsider their positions and support local jobs". Â
"Politicians have been warned of the dire consequences if media laws aren't changed," Harris said, "and yesterday those predictions were proven correct. It's now more important than ever that you make these changes before it's too late."
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