Leader 1 July 2011
LISA CAMPBELL EDITOR
is complex and ugly, but for now it’s
as usual at Endemol’
debt story ‘Yes the The fight is on at Endemol With so much at stake, a resolution to the fi nancial woes will be found
“What’s going on at Endemol?” is a question we’ve been asked several times this week. Losing your chief exec, sitting on an eye-watering €2bn of debt and being poised to breach your covenants does not do much for the brand image. On paper, it looks fairly grim. The company
business
was bought in 2007 at the height of the equity boom, with shareholders Cyrte, Goldman Sachs and Media set stumping up €3.4bn. Like buying a mansion at the height of the housing market, the 60% loan to fi nance it seemed affordable at the time. But when the world went into fi nancial meltdown, it was a different story and the fi rm has been battling to cope with its huge interest payments ever since. Chief exec Ynon Kriez was drafted in a year later,
and knowing that the situation was not sustain- able, set about restructuring and cost-cutting. Clever accounting helped stave off a breach of the covenants in 2010 (a move slammed by its lenders) but it effectively amounted to putting a cork in a dam hole. The debt-to-earnings ratio was targeted at 10.8. It currently stands at 14. The company’s earnings have also plummeted from €235m in 2007 to €140m this year. Nevertheless, Kreiz, who is credited for expanding operations to 31 countries, oversee- ing 13 M&As and expanding scripted entertain- ment (largely through acquisition), exited with a reported £10m send-off.
Now the three joint-owners are locked in what’s
described as a Mexican stand-off, negotiating with hedge funds that have bought up large chunks of the debt. Swapping debt for equity in the
company, which last year had revenues of about €1.25bn, is one proposal. Sources suggest that this could be for as much as a 49% stake, but it is unclear how much debt that involves writing off. Blink fi rst and you risk betting the farm; fail to
act and everyone loses. Fact is, there is too much at stake, so there will be a resolution and a restruc- ture, even if it takes months of hard bargaining. While some criticise Kreiz for his focus on
sports production, for failing to suffi ciently build on Endemol USA, its distribution and its digital media business, it remains a powerhouse with a catalogue of 24,000 hours. So for now, it’s business as usual, but what of
the future? The debt story is complex and ugly and is an increasing frustration for creatives, who, if tied to a corporate beast, at least want it to be stable. Sources also suggest a future buyer could be hard to attract. The saving grace could have been The Voice,
the John de Mol-created format predicted to be the next global splash. So why not produce and distribute it through Endemol, the company he owns 33% of, instead of opting for Shed and Warner Bros? A million-dollar question sending a very mixed message.
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2 | Broadcast | 1 July 2011
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