I'm having a look at Foxtel's financials for the next podcast. Spoiler alert: they look hideous. The covenants on Foxtel's actual debt package are at levels you see for a distressed company - ie the banks view them as in trouble. Banks have also tightened the screws on headroom.

Foxtel continues to be massively propped up by shareholder loans from News Corp. News Corp has pumped in $900M in shareholder loans and is charging Foxtel up to 8%pa interest on them. A hefty fee reflecting the risk of those loans.

Foxtel also had to go to the term loan market which is often used for distressed borrowers just to get liquidity. It pays 6.25% on that debt - debt which ranks ahead of the shareholder loans - which is very expensive indeed. But not as expensive as Telstra....

Yes Telstra (which owns 35% of Foxtel) has lent Foxtel money at about 8% just to make sure it gets its cable fees paid. It's a subordinated loan (gets paid after other loans) and allows interest to be added to the loan value if unable to be paid.

Why do this? Because as a shareholder, Telstra ranks behind creditors if Foxtel goes broke - it has to wait until all creditors are paid off before it gets anything. Having a loan elevates Telstra to a creditor and gives it a bigger seat at the table.

This is all said in the context of the February 2020 results announcement. BEFORE coronavirus hit. Remember, Foxtel had said they expect the winter sports season to be the key driver to improve its turnaround for the year.

How does Foxtel address this? Well one obvious opportunity would be to reduce costs. It just laid off 200 staff and put another 140 on leave until June. And you would expect they would try reduce any other costs they have.....

For example, if they had a massive fee they pay for a product, they would be doing all the can to try reduce the amount they have to pay for that product. Maybe by constantly criticising the product and finding flaws in how it has been managed. Desperate times indeed....