BEHIND THE SCENES AT ENDEMOL

Q. What is time warner hoping to achieve?

A. Time Warner has turned its eyes to Europe: of the company’s 20 deals in the last few years, about 80 per cent have been outside the US. Endemol’s deadline for sorting out its finances is today, so this is an opportune time for Time Warner to make its move.

Q. how has endemol responded to time warner’s approach?

A. It says the revised offer does not really change anything. Endemol’s negotiations with lenders have been going on for about a year, and the far more likely option, according to one source, is that the bid will not be accepted.

Q. why does endemol’s debt need restructuring?

A. Endemol is currently €2.8bn in debt. When the TV company was acquired by Goldman Sachs, Mediacinco and Cyrte in May 2007, these companies raised the debt financing. Endemol has struggled to meet the required interest payments, partly because the entertainment industry has taken a hit lately. The company has been in discussion with its creditors for a year or so about revising its capital structure to avoid the breaching of loan covenants. A waiver was extended last month, which expires today.

Q. what will the debt restructure involve?

A. The existing debt is expected to be written down significantly and in return the lenders will receive equity in the business. This will require two thirds of the lenders’ support to go through. Endemol’s loan covenants will be revised and it will be left with a smaller amount of debt to service.

Q. what will happen next?

A. It is likely that Time Warner’s bid will not be successful and the lenders will write Endemol’s debt down to around €500m.