SYDNEY — Many of the creditors of failed video distrib Network Entertainment will receive a maximum payout of 10¢ in the dollar under an agreement struck with Network’s administrators, Price Waterhouse.
The agreement by creditors to sell Network, struck at a Monday afternoon meeting, saves the company from being fully liquidated. Administrator Greg Hall said three groups were interested in acquiring Network, which is expected to be sold within weeks.
Network opted for voluntary administration last month as a reported cash flow crisis gripped the company, just eight months after an A$12 million ($8.8 million) public float and listing on the Australian Stock Exchange. The group’s shares were suspended from trading at a record low of 8¢ — a mere 5.5% of its $1.46 issue price, putting the group’s capitalization at about $1.6 million, down from a peak of $24.1 million.
Secured creditor the Commonwealth Bank is owed about $3.8 million, while unsecured creditors are owed $2.1 million. Price Waterhouse said the company had been placed under administration to protect its video distribution rights, including a 10-year deal with Spelling Entertainment’s Republic Pictures Home Video covering 1,400 titles, which could be voided if the company were forced into liquidation.
When filing for administration, Network chairman Gary Garton told reporters that the loss earlier this year of distribution rights to video product from Warner Bros. and Columbia TriStar led to cash flow problems, coupled with a downturn in the video sector after eight consecutive years of growth.
Since its December stock market debut, Network slashed its profit forecasts, eventually forecasting a net loss for fiscal 1997 in contrast with the prospectus forecast of a $1.9 million profit. In recent months, such key directors as former federal opposition leader John Hewson, former Network Ten news director Carmel Travers and ex-Time Warner exec Bonita Boezeman have quit the company.