Tuesday, April 12, 2011

More on Mediaworks

The Mediaworks story is in the news today, with articles in both the Herald and NBR. In both cases though, I'd take serious issue with their take on things.

Firstly, John Drinnan's piece in the Herald says that the deal was intended to stave off problems with MediaWorks' capital structure. What he doesn't mention is the sections of the reports stating clearly that that capital structure was imposed on them by the company's foreign owners, Ironbridge, who had loaded the company with debt to fund its takeover. Also unmentioned is the overall conclusion of MED officials based on the Deloittes' modelling: that the company was profitable in the long-term, that it had other options, and that it did not need our money.

Meanwhile, the NBR's Matt Nippert relies on MediaWorks insiders to finger Gerry Brownlee as the culprit behind the loan [paywalled]. Brownlee was certainly involved in pushing it to Cabinet, but the fundamentally the timings don't work. According to the article, MediaWorks successfully met with Brownlee after their August 9 meeting with Key. But the paper trail clearly shows that Joyce had made the crucial decision to negotiate (and laid down the parameters of the deal) back in July. After that, it was just a matter of working out the details (5 payments or 6, 11.25% or 13.25%?). Brownlee's support may have been essential at Cabinet, but he wasn't the prime mover here.

Nippert also makes the same mistake as Drinnan, highlighting concerns about capital structure while ignoring the conclusions about underlying profitability drawn from their own books. But then, that's the entire story in nutshell: a business sticking its hand out and demanding money, while all the evidence shows that they do not in fact need it.