As the major lenders to the Nine Network try to reach some form of compromise, suddenly the horror word “receivership” is being mentioned in some media reports.
I don’t think the lenders to Nine would be silly enough to allow the group to go into receivership but stranger things have happened.
The purpose of this article to warn Nine executives and suppliers about what happens if the unthinkable takes place and Nine is put under a receiver.
I have personal experience. Back in December 1990 the ‘unthinkable’ happened and a receiver was appointed to John Fairfax. At the time I was in charge of the BRW group, which was a wholly owned Fairfax operation.
That meant that all of my suppliers – from the cleaner to some contributors – were unsecured creditors. They were in grave danger of being out of pocket.
At Fairfax we were lucky. The receiver, Des Nicholl, was a good operator and he allowed us to pay those who were important to running the business. That way a great many BRW suppliers got paid who, strictly speaking, were not really entitled to be paid. But a lot missed out.
I convinced most of those who missed out to keep supplying and that I would find a way to look after them. While there was no personal guarantee, they knew I would do everything in my power to get them paid. Over time everyone who was genuinely owed money by BRW, and whom I could look after, was paid.
But not every Fairfax executive made it their responsibility to look after people who had supplied their part of the organisation.
All those who are supplying the Nine Network should be very careful because they are unsecured creditors.
At this point, while the big secured financiers are sorting out their dispute, Nine executives should be making an assessment of the likelihood of a breakdown. If they are genuinely fearful of such an event and consequent receivership, they should be paying all supplier bills within 24 hours.
Remember, just as Fairfax got into trouble because people loaned Warwick Fairfax far too much money and so he paid too much for the company, so Nine is in trouble because stupid lenders did not understand the nature of the free-to-air TV business in an internet age.
They were foolish and deserve to lose money. Hedge funds are now involved and it’s a question of who loses how much. If unsecured suppliers demand quick payment from Nine it may bang a few heads together and avoid a receivership. Appointment of a receiver would be bad for everyone – except the receiver.
This article first appeared on Business Spectator.
