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Fears grow over future of Setanta Sports -


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By Paul Kelso, Chief Sports Reporter

05 May 2009

 

Executives from the broadcaster met Premier League chief executive Richard Scudamore on Thursday to ask for more time to meet the scheduled instalment on its existing £392 million three-year rights deal.

 

Telegraph Sport understands that the request has been rejected and the League intends to hold Setanta to its contract, raising fresh concerns over the broadcaster's immediate prospects.

 

The payment is the largest and most significant among £100 million of obligations that Setanta is due to meet before the end of the year and it was hopeful of securing a concession from the Premier League to help ease an immediate cash-flow crisis.

 

The League's decision to reject that request and insist that payment is made on time and in full will come as a blow to the broadcaster as it seeks to persuade investors to provide the £100 million it needs to continue as a going concern.

 

Setanta is engaged in a major restructuring of its business after failing to retain both the packages of Premier League matches it owns in the 2010-2013 rights auction held earlier this year. Setanta also has a £150 million, four-year deal for England home internationals and the FA Cup.

 

Doubts about Setanta's future first emerged in March when, as revealed here, it was late with a £10 million payment to the FA. Insiders insist that it is up to date with all payments and intends to meet its demands going forward, but the company is reliant on fresh investment to do so.

 

With fewer Premier League matches to attract subscribers from 2010 the company's primary investors, Goldman Sachs and private equity houses Balderton Capital and Doughty Hanson, have major concerns as to the viability of the existing business model.

 

A new management team has been appointed with Sir Robin Millar, formerly of publishing house Emap, leading the search for investment. Gary McIlraith, a former Sky executive, has been appointed chief executive of Setanta UK.

 

Their strategy has been to approach all their partners and renegotiate payment schedules and in some cases to ask for a reduction in fees. Talks have been held with the Scottish Premier League, whose new deal running from 2010 is worth £125 million, as well as Premier Rugby, the Indian Premier League and the US PGA Tour.

 

Setanta has stressed in discussions with governing bodies that its presence in the market alongside Sky has been beneficial, driving up the value of rights. The SPL, for example, has seen the value of its rights almost double.

 

Setanta's arrival as a competitor to Sky drove up the domestic value of Premier League rights by almost 70 per cent in the 2007-2010 rights auction, but the League now seems determined to hold the company to the letter of their contract.

 

The Premier League's position may be informed by the need to distribute more than £600 million to its clubs at the end of the season, but its decision also demonstrates deep confidence in the value of its rights.

 

The League has shareholder guarantees from Setanta's major stakeholders and could expect to get close to its valuation of £130 million for the final year of the contract if the broadcaster were to fold.

 

Setanta's hopes of avoiding that fate now rests on persuading Doughty Hanson and Balderton to back their initial investment with enough money to see the company through to the end of the year, by which time the credit markets may have recovered.

 

There are also understood to be internal discussions about the two finance houses taking equity stakes in the company similar to that held by Goldman Sachs.

 

There will be many in sport, and not just those reliant on Setanta's largesse, hoping they reach a positive outcome.

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