Tinopolis restructuring angers producers of big TV hits

Tinopolis, the maker of the BBC’s Question Time and Netflix’s Nailed It, is at war with many of the creators of its biggest hits after a restructuring that will wipe out tens of millions of pounds owed them while leaving management with the group’s assets.

A buying spree by Tinopolis, whose shows include Hell’s Kitchen, American Ninja Warrior and BT Sport’s English Premier League programmes, transformed it into one of the biggest independent factual television producers in the US and UK markets.

Many of its hits were created by producers whose businesses Tinopolis acquired for a combination of cash, equity and loan notes.

Six of them who spoke to the Financial Times said they had been blindsided when they were presented with the restructuring plan last month, having had no warning that the company was in financial trouble.

The restructuring has angered some loan note holders — a type of IOU which accrues interest until being redeemed at an agreed date — who now stand to collect substantially less from the sale of their businesses to Tinopolis.

Tinopolis directors, flanking a liquidator from Buchler Phillips, told a Zoom call on March 24 that they were winding up the company where the loan notes were held. In parallel 95 per cent of the shares in the group’s trading entities were transferred to a new management-owned company.

Management argued the restructuring was needed to ensure that the group, which spans 13 production companies including Mentorn, Sunset+Vine and A Smith & Co Productions, survives the disruption the pandemic has wrought on the industry.

Creditors complained that they had not been given enough time to find a bidder willing to make a better offer for the assets, but failed to muster the votes to stop the restructuring. Several said they were consulting lawyers but were unsure what recourse they had.

“We’ve been open to negotiation but they obviously feel they’re within the law to lose us. They don’t want to carry us,” said Sally Miles, who held loan notes worth just over £2m after selling Passion Distribution to Tinopolis.

“It’s just outrageous,” echoed Stuart Carter, the co-founder of Pioneer Productions, who also held loan notes worth more than £2m. “Everybody knows you’re being given bits of paper and they may not be worth what you think. But to get zero point zero pounds for 45 per cent of my company is not right.”

Dan Cutforth and Jane Lipsitz, who sold Magical Elves to Tinopolis and left in 2019, stand to lose up to £25m. Arthur Smith, chair of Tinopolis USA, was also owed a similar sum.

Ron Jones, founder and chair of Tinopolis, and chief executive Arwel Rees will continue running the business, having raised about £10m in new debt and made a “significant” but undisclosed investment into the group. Together Jones, Rees and Smith now own more than 50 per cent of Tinopolis through a new holding company established with about £300,000 of capital.

Jones told the FT: “To be absolutely blunt, the loan note holders, including management, are out of the money because there was no value left at the trading group. The loan notes and the equity were completely underwater to the banks. Anything that goes out to the loan note holders is a bonus.”

Tinopolis issued roughly £100m of loan notes in total to management as well as producers who sold their companies to the group.

“We’ve sold over a hundred companies in this space and this has not happened anywhere else,” said Thomas Dey, founder of ACF Investment Bank, who negotiated many of the producers’ deals with Tinopolis.

Netflix show Nailed It, which is made by Tinopolis company Magical Elves © Netflix

Jones told staff on Friday that the measures were needed to recover from the “dark times” of the pandemic and its financial impact, according to a message seen by the FT.

“All our banks and institutional investors have committed to invest significant new funds so that we have the cash to restore operations to pre-pandemic levels,” he told employees. “As part of the refinancing there was a requirement to change our capital structure and regrettably a non-trading group company, in which loan notes owned by current and former management are held, needed to be closed.”

Founded in 1990 and based in Llanelli, Tinopolis listed in London in 2005 before being taken private for £44.7m in a deal backed by Vitruvian Partners, a private equity firm, three years later.

Jones and his management team then bought the company back for an undisclosed sum in 2017. A restructuring at the time pushed back the date at which Tinopolis would repay the loan notes from 2018 to 2025, cut the interest rate on the notes and compelled many equity holders to sell their stock for a nominal sum.

The group’s latest accounts for the year to September 2019 disclose revenues of £272m and pre-tax profits of £1.8m. The company boasted at the time that it had been “consistently cash generative” and was “well placed” going into 2020, with a high percentage of its budgeted sales already secured by contracts.

According to management, however, rising costs and production shutdowns during the pandemic left Tinopolis struggling to meet its repayments to its senior lenders, including HSBC and BlackRock. Management decided a restructure was unavoidable after FTI Consulting assessed the company to be worth less than its bank debt, which stood at about £135m.

Under the plan pursued, the directors proposed voluntarily winding up the subsidiary holding loan notes, while selling the 95 per cent of the shares it held in the production companies to a new management-owned company. Management has also made an offer to liquidators for the 5 per cent of shares still remaining in the subsidiary holding loan notes.

With the restructuring in place, Jones told staff the company was “primed for recovery”. “The damage caused by Covid has been significant and recovery will not be easy. However, our underlying business has been resilient,” he said.

Mark Soldinger, who was owed £2.8m after selling Firecracker Films to Tinopolis, said it had provided a “shocking” cautionary tale for producers thinking of selling to such super-indies. “We’re owed a lot of money and we’re very unhappy,” he told the FT.

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