ANALYSIS: Turning Chorus around will be a challenge but its owner has deep pockets. Colm Keena reports
Statements made to the High Court yesterday indicate that not much has happened since Chorus signed off on its most recent accounts in January 2002.
The accounts were for the year to December 31st, 2001, but the directors' report brought the picture up to date, to the time of signing.
The operating loss for the financial year was €39 million and an impairment review of the group's fixed assets resulted in an exceptional item of €178 million. This made for an overall loss for the financial year of €217 million.
"The trading results for the year reflect a further poor performance of the business, operating in an increasingly competitive market," the directors noted.
In March 2002, the group failed to reach the performance criteria necessary for it to be able to draw down further bank funding. The group's operations were being financed by loans and equity injections by the shareholders, Independent News & Media (IN&M) and Liberty Media Corporation.
Last year, IN&M ploughed a further €10 million into the company, an injection that was no doubt matched by Liberty. The High Court was told yesterday that Liberty would fund Chorus to the tune of €4 million to assist it through the examinership period. So the firm is still eating up cash.
But Liberty has pointed out that most of Chorus's accumulated debt relates to initial capital investment and acquisition costs. Other cable TV firms in the US and Europe have managed to restructure debt and transform themselves into viable concerns. Now it is the turn of Chorus.
With IN&M gone, all remaining hopes must rest on Liberty. It is likely 20 banks, owed more than €220 million, will have to take a significant hit.
Fortunately for Chorus, Liberty Media has very deep pockets. It operates in the US, Europe, South America and Asia, and has stakes in well-known international media concerns, including News Corporation, associated with Mr Rupert Murdoch.
Liberty is owned by Mr John Malone, a US cable mogul who made his money in cable television and owns the QVC channel and half the Discovery network. Earlier this month, there was media speculation around the world that his increasing stake in News Corp could have serious implications for Mr Murdoch's plans to pass on control of News Corp to his family.
Mr Malone spent $693 million (€560 million) in January increasing his holding in News Corp, bringing it to 30 per cent. He holds 17 per cent of the corporation's ordinary shares, compared to the 14 per cent held by the Murdoch family. But the Murdochs hold 30 per cent of the voting stock, as against Mr Malone's 9.15 per cent voting stock.
With shareholdings such as that it is clear that Liberty has the wherewithal to deal with Chorus. How much Chorus believes will be required to deal with the company's debt and bring it around to profitability was not being disclosed last night but it is certainly in the tens of millions, if not more than €100 million. And, of course, there can be no guarantee that it can be turned around.
