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DEBT WATCH: Fairfax Media has to find $2 billion in two years to survive

fairfaxdeath Fairfax Media is a company on the brink of financial disaster.

As long predicted by this correspondent on VEXNEWS and our predecessor publication the OC (of blessed memory), the left-wing newspaper publishing company’s dependence on classifieds advertising sales means it is dying before our very eyes.

Documents obtained by VEXNEWS clearly demonstrate that the company will struggle to replace existing debt facilities that mature in the calendar years 2011 and 2012. The chart showing Fairfax Media’s “Drawn Committed Facilities Maturity Profile” is available below also.

It reveals that $2 billion of debt sourced from banks, bonds and other sources falls due in the next three years. With plummeting ad sales across the board, metropolitan daily newspapers on their balance sheet as being worth much more than their market value, many believe Fairfax Media will struggle to re-finance without the assistance of government or liquidators.

Market insiders who are clearly watching media stocks say that there is a “better than even chance” that Fairfax Media will have to sell up in that time-frame.

“There are some good assets there that are weighed down by a Jurassic Park business model at the Sydney Morning Herald and The Age. A responsibly run company would separate out those, as a first step. Perhaps, they could be given to the ABC before they start losing money,” one analyst argued today.

“But we know they won’t do that so you’ve got the Age and Herald dragging down this company, the share price was always going to take a battering with the cyclical slowdown in ad sales but the reason we’ve gone below $1 on this stock is that parts of the company have a very limited future and imperil the whole,” he said.

Brokers reports from across the financial community are designating Fairfax as a SELL or HOLD or equivalent. The share price is in freefall, dropping like a stone from nearly $5 over a year ago to below $1 now.

“No one is pricing in what you’re talking about which is the prospect of them not being able to replace the 2011/12 debt. If they can’t, you’re right, they’re gone. Dead meat. But they’re not alone in that, many companies are facing a similar issue and are going to the equities markets to replace money no longer available from banks or bonds. Look at TEN Network, they were trying to raise a lousy $80 million and had no takers. It’s not a good time for any media companies, especially those with old style business models like The Age,” a broker known for his knowledge of the sector explained today.

In addition to all that carnage, there is every chance that Fairfax Media’s biggest shareholder blueblood John B. Fairfax will be bankrupted by a further fall in the price of the company’s stock. Well placed sources say the 80 cent mark is crucial for him, with current loan covenants requiring him to kick in more equity if the shares go below that level.

Some doubt he has much more equity to kick in.

In a joyous nutshell, Fairfax Media has :

â–  A $2 billion debt mountain to climb with the credit markets failing;

â–  A Jurassic Park business model; and

â–  A big shareholder likely to be bankrupted.

It could hardly get any worse for the left-wing newspaper publisher. It should be illegal to have this much fun.

fairfaxdebtmaturity

Discussion

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  1. ASIANS OUT!

    Posted by sunshiner | February 19, 2009, 16:42
  2. I’m falling. They have money for this year and next. They have no plan to save themselves in 2011. Goodbye.

    Posted by catch me | February 19, 2009, 18:00
  3. redundancies are on the way.

    Posted by deadmeat | February 19, 2009, 18:14
  4. Hey Captain is it true that the AIRC has found Pauline Fegan guilty of using WORK CHOICES to sack UNION employees?

    Posted by THE QC | February 19, 2009, 18:19
  5. Watch for the dissembling pre-obituaries direted at the ignorant and the too-young-to-think.

    Posted by Gerry of Mentone | February 19, 2009, 18:22
  6. I suppose it’s lost on the executives of Fairfax that a key plank in any rescue programme is to have the newspapers behave as newspapers- not some lunatic left-wing shit sheet pushing their loony anti-business causes

    Posted by Whitlamite | February 19, 2009, 18:36
  7. It is obvious why Fairfax stock is in the toilet. A bright young man is appointed to lead the Herald Sun and the stock market takes notice of the wonderful things he is doing to the paper. Expect the shares on New Idea and Who to slump as well the Herald Sun invades their turf as well.

    Posted by Mrs. P | February 20, 2009, 8:50
  8. They have said today that even now their cash flow is more than $200m in 6 months. They can convert the SPP ($500m) to shares. And they have 2011 covered.
    It would appear that your view is half-arsed?

    Posted by flynn | February 23, 2009, 12:34