Big Brother in trouble?

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The banks that bankrolled the buyout of Endemol from Telefonica last year are seeking their money back – at a thumping great discount.

Endemol, maker of Big Brother and Deal or No Deal, was bought by €2.6 billion just before the credit crunch hit by a consortium including Mediaset and the original founder of Endemol, Jon de Mol.

The consortium only invested €400 million of equity. The remaining €2.2 billion (£1.7 billion) was provided as debt by a bunch of banks (Goldman Sachs, Barclays, Credit Suisse, Lehmans, Merrills and Royal Bank of Scotland.)

According to the The Times, these banks are now trying to sell Endemol’s debt on – a financial move that is very common amongst big deals to spread risk. The only problem is that they can’t find any buyers. Market rumour was that that they would sell at 65% of face value, leaving them sitting on a loss of over €750 million (£590 million). Goldmans was unhappy with this rumour, so they announced that that they were only (!) looking as low as 72.5% of face value.

This is a massive discount. No, seriously. Massive. The value of equity fluctuates wildly. The value of debt doesn’t. For the banks to be prepared to see such a big drop means that they have significant concerns over the underlying value of Endemol.

This is a headache for new CEO Ynon Kreisz. I blogged about Ynon’s appointment from Balderton Capital and speculated whether that would lead to an acquisition of Codemasters. Such a deal still makes strategic sense – but at the moment it seems as if Endemol is in no fit state to make acquisitions.

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