HIT forced to take $500m write-down
19 April 2010 3:12am
HIT Entertainment, the child entertainment distribution company, has written off $500m (£325m) of its value.
The write-down of goodwill means the value of a £489m investment by private equity owners Apax Partners has effectively dropped to zero.
Hit Entertainment, owners of Thomas the Tank Engine, Bob the Builder and Barney the Dinosaur, recorded a pre-tax loss of $569m at its end of year results last July, following a loss of $16.3m the year before.
The company chairman, Greg Dyke, cited the increasingly competitive marketplace as the reason for the heavy losses. It said broadcasters had started developing their own programming, cutting out the need for independent third party companies.
The company’s gross profit results were also poor, falling from $136.1m to $128.3m.
It said digital downloading was increasingly a threat to the industry, adding that declining DVD sales had also been a major reason for the poor results.
Nevertheless, last week HIT successfully reached agreement with its lenders to amend and extend its credit facilities after breaching its covenants. Evercore Partners, the advisory and investment firm, has been hired by HIT to negotiate new covenant terms.
Jeffrey Dunn, president and chief executive of HIT said: “We are delighted to conclude these negotiations with our lending group and are grateful for their support. This allows us to focus on what we do best – making great entertainment for kids.”
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