Your $43m lifeline to TV3 owner

MediaWorks' latest accounts show it has essentially received a $43.3 million loan from the Crown. Photo / Thinkstock

The Government has thrown a lifeline to ailing private media company MediaWorks, which owns TV3, Four, and about half New Zealand's commercial radio stations.

MediaWorks' latest accounts show it has essentially received a $43.3 million loan from the Crown to enable it to renew its radio broadcasting licences for the next 20 years.

According to the accounts, which MediaWorks is obliged to file with the Companies Office because it is overseas-owned, the private company is paying 11.2 per cent interest on the money, which has been granted for just over four years.

The Government appears to have agreed to the deal despite MediaWorks taking the Inland Revenue Department to court over a disputed tax bill. The IRD alleges the company owes $24.5 million in tax, interest and penalty payments from 2002 to 2004.

Telecommunications Minister Steven Joyce yesterday said the money was not a loan, but a deferred payment system to help the radio industry during tough times in 2009. Earlier reports said MediaWorks had been due to pay the Government the $43m in October last year to renew its radio licences for the 2011-2031 period.

Mr Joyce said if MediaWorks was unable to pay its instalments, its radio frequencies would have to be given back to the Crown.

He said the Radio Broadcasters Association had told it some broadcasters were struggling to pay their licence fees in a lump sum.

The Government had agreed, as it was difficult for companies to raise more debt at the time, and two small broadcasters had also asked if they could defer their payments.

MediaWorks was bought by Australian private equity company Ironbridge in 2007, from its Canadian owners.

Since then, it has struggled with huge debts and in 2009 wrote off assets worth $260 million in a restructuring.

Its bankers swapped debt for equity, and its owners now include Goldman Sachs, the Royal Bank of Scotland, and the BNZ.

Last week, it said it had made a $50 million profit, before finance costs, for the 2010 year.

But the accounts show its finance costs turned that into a $55 million loss over just eight-and-a-half months.

The accounts show MediaWorks' underlying pre-tax losses increased from $42 million in 2008, to $53 million in 2009, to $55 million last year. Its borrowing over the same period increased from to $530 million to $562 million.

The company claims the way it has been set up by its owners makes the accounts look worse than they are.

According to its auditors, it is not likely to have problems paying its debts, and does not expect to breach guidelines set by its banks.

However, rumours have been swirling around the industry for months about the company's financial position, and several senior staff have left it in recent months.

MediaWorks radio networks include RadioLive, MoreFM, The Breeze, The Edge and Mai.

NO FRILLS AND FEW VIEWERS

It has been pitched as a news show with no frills - but TV3 will want more viewers than its new show drew on its first morning.

TV3's morning news show Firstline drew 17,790 viewers, while TVNZ's Breakfast attracted 141,180.

Firstline's ratings on day one were much lower than the 20,000 to 30,000 viewers TV3's Sunrise was drawing before it was axed.

Announcing Firstline - fronted by Rachel Smalley - Mediaworks TV chief executive Jason Paris said the new show reflected the network's commitment to news.

"Many New Zealanders don't have a lot of time in the morning. There won't be any coffee mugs on the anchor's desk or stories about how to look after your pets."

TV3 director of news and current affairs Mark Jennings said he was happy with the way the show had opened.

While the average audience rating was 17,790, he said, more than 126,000 people tuned into the show at some point during the 2 hours it was on.