Nine Entertainment Group Limited, in the matter of Nine Entertainment Group Limited (No 2) [2013] FCA 40

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 2079 of 2012

In the matter of Nine Entertainment Group Limited ACN 122 201 905 BETWEEN: NINE ENTERTAINMENT GROUP LIMITED ACN 122 201 905

AND: PAR LENDERS AND HEDGE COUNTERPARTIES IDENTIFIED IN THE INTERLOCUTORY APPLICATION FILED ON 17 DECEMBER 2012

SUPPORTING SENIOR LENDERS IDENTIFIED IN NOTICE OF APPEARANCE FILED 1 DECEMBER 2012

JUDGE: JACOBSON J DATE: 29 JANUARY 2013 PLACE: SYDNEY

REASONS FOR JUDGMENT 1 This is the second court hearing of an application to approve a scheme of arrangement between Nine Entertainment Group Limited and its secured creditors. I described the details of the scheme in my judgment given on 20 December 2012, setting out the reasons for convening the scheme meetings: Nine Entertainment Group Limited, in the matter of Nine Entertainment Group Limited (No 1) [2012] FCA 1464. It is unnecessary to repeat what I said in the earlier judgment. 2 The scheme meetings which I convened by orders made at the first court hearing, have now been held. The scheme has been approved overwhelmingly at the meeting of senior beneficiaries. 96.61% of the senior beneficiaries present and voting, voted in favour and 96.88% in value of the debt held by those beneficiaries present and voting, voted in favour of the scheme. 3 At the meeting of subordinated beneficiaries the scheme was unanimously approved both in terms of number and value of the debt held by the subordinated beneficiaries. 4 At the first court hearing a group of senior beneficiaries appeared and opposed the convening of the scheme meetings. Those beneficiaries comprised some of the hedge counterparties and some of the original senior facility lenders described as the par lenders. I described those parties in my earlier judgment collectively as "the opponents". 5 There were two grounds of opposition. One of which was that the parties referred to as Oaktree and Apollo constituted a separate class of beneficiaries from the other senior beneficiaries. I rejected that submission but directed the company to keep a record of the votes at the senior beneficiaries' meeting so that the relevant information could be put before me at the second hearing. 6 Following the first court hearing, the opponents indicated an intention to oppose approval of the scheme at the second court hearing and they raised the possibility of commissioning an expert report for that purpose. However, the opponents have now indicated that they will not be opposing the orders approving the scheme and they have not appeared at today's hearing. Indeed, one of the opponents voted in favour of the scheme and two voted against, while one abstained from voting at the meeting. 7 The records that were kept in accordance with the direction that I gave at the first court hearing indicated, as I have said, that only two senior beneficiaries voted against the scheme, representing in aggregate 3.12% of the admitted value of the senior debt. 8 The evidence of Mr Drew also establishes that if Oaktree and Apollo were excluded from the meeting and voted as a separate class, the resolution would nevertheless have been approved by 93.46% in value and 96.23% of the remaining senior beneficiaries present and voting. 9 Accordingly, even if I had accepted the submission put by Mr Sheahan at the earlier hearing, it would have made no practical difference to the result. This is because even if three separate class meetings were held, the scheme would still have been approved by an overwhelming majority. 10 If the scheme is approved Nine Holdings intends to rely upon the Court's approval for the purpose of qualifying for an exemption from the registration requirements of the U.S. Securities Act of 1933 provided for in section 3(a)(10) of that Act in connection with the issue of Nine Holdings shares by way of implementation of the scheme. 11 Applications such as this are commonly made and have been the subject of a number of decisions dealing with that question. The seminal authority is that of Barrett J in Re Permanent Trustee Co Limited (2002) 43 ACSR 601. His Honour there discussed the other leading authorities, namely the decision of Emmett J in Re Central Pacific Minerals NL [2002] FCA 239 and the decision of Lander J in Re Simeon Wines Limited (2002) 42 ACSR 454. 12 One of the requirements is that notice must be given to the Court that the order of the Court will be relied upon by the issuer. Notice has been given and I will make provision for that to be noted in the orders which I propose to make. 13 A further requirement is that the Court considers the fairness and reasonableness of the proposed scheme of arrangement. The effect of the authorities which I have mentioned is that the Court does not act as a valuer but receives assistance from the existence of an independent report from an unaligned expert. 14 In the present case I have an expert report from PPB Advisory. I referred to the report at [30] of my earlier judgment. I am satisfied upon the basis of the report of PPB Advisory and the fact that no opposition to the scheme has been made that the scheme is one that appears to be fair and reasonable. Certainly no contrary argument has been put before the Court. 15 I am also satisfied, on the evidence to which Dr Bell has taken me in some detail this morning, that all of the necessary procedural steps have been completed and that all of the relevant conditions precedent have been satisfied. 16 For these reasons I propose to make orders in accordance with the draft orders discussed with Dr Bell this morning. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson.