Creditors unaware of ‘value’ of rival Ten Network offer, court told

Financial details of a rival offer for the Ten Network were not passed to creditors, it was alleged in court yesterday.

Financial details of a rival offer for the Ten Network were not passed to creditors, a court heart yesterday.

Ten Network creditors were “left wholly in the dark” about the value of a competing takeover offer as a result of administrator KordaMentha’s failure to outline the value of Bruce Gordon and Lachlan Murdoch’s bid, a court has heard.

Lawyers for Ten backer Mr Gordon argued that neither the original report by KordaMentha nor a supplementary report to address deficiencies in the first one supplied any material as to the effective value of the transaction, Andrew Bell, SC, told Justice Ashley Black.

Mr Gordon is seeking a court declaration that KordaMentha, which backed US media giant CBS’s bid, failed to give creditors adequate information about his joint bid with Mr Murdoch because the official report was deficient in several respects.

Justice Ashley Black is due to hand down a judgment on Monday, the day before a second meeting of Ten’s creditors, which will vote on the CBS bid. The hearings concluded last night.

Amid interruptions including a fire alarm during proceedings and defective microphones on the last day of the two-day hearing at the NSW Supreme Court, Dr Bell argued that there was no basis on the evidence before the court for concluding that the effective value of the Gordon-Murdoch transaction would have been any less.

The deal would deliver more value to creditors, Dr Bell said, not only because of the “greater pool of money for unsecured creditors”, but also because the “crippling” CBS contract to supply Ten with content would have been renegotiated or terminated. He said KordaMentha did not tell the creditors that the CBS proposal did not treat all of them equally, and could face a legal challenge.

On the other hand, Gordon and Murdoch proposed a structure in which creditors “are all treated equally”, Dr Bell said.

“Why would creditors give a tick to something that’s going to get attacked when two reputable people put forward an offer with comparatively less risk?”

He said there was no urgency for Ten creditors to sign off on a recommendation to sell the company to CBS. As KordaMentha partner Mark Korda looked on from the back of the court, Dr Bell said the administrators had painted a false picture that had the effect of “misleading” creditors.

Contrary to statements made by KordaMentha, creditors had sufficient time to consider an alternative proposal by Mr Gordon and Mr Murdoch because the Deed of Company Arrangement (DOCA) with CBS does not expire until December 15 this year, he said.

The Gordon-Murdoch offer for Ten had “far less transaction risk” than the CBS offer as Justice Black dismissed a sought amendment for the proposal to be put to creditors of Ten on September 19.

Mr Gordon’s legal team abandoned the move because “the price to be paid” was an adjournment of the current hearing.

In reply, Richard McHugh, SC, representing KordaMentha, said “the reality is that somebody else put in a better bid” in relation to the CBS transaction.

Mr McHugh dismissed the contention that KordaMentha was not legally authorised or empowered to express an opinion as to the merits of one deal over another.

The administrators have a “statutory duty to express an opinion ... that point can go nowhere,” he told Justice Black.

After Justice Black extended the hearing until 7.30pm, CBS lawyers argued that he should have “little trouble rejecting the submission” made by the plaintiffs to stop the company voting at the meeting of creditors.

It was fundamental for a company placed in voluntary administration to have its fate determined by a vote of creditors, CBS said.

Responding, Dr Bell said: “It is not an application to stop the meeting, it is an application to adjourn until creditors are properly informed of these matters.”

The court action was brought last week by Ten affiliate WIN Corporation, owned by Mr Gordon, and its chief executive Andrew Lancaster, also a former Ten board member.

21st Century Fox, which joined WIN as a plaintiff in the court action and also supplied Ten with programming, receives just 1.75 cents in the dollar on its $195 million debt value.

Fox shares common ownership with News Corp, publisher of The Australian. Mr Murdoch, co-chairman of News Corp, and his family are major shareholders in Fox and News Corp.