Quickflix has advised that it is seeking to restructure shares held by rival subscription video-on-demand provider Stan, which it states are a disincentive for investors.
The move comes as Quickflix seeks to progress capital raising and pursue corporate transactions.
Stan, the Nine Entertainment Co. and Fairfax Media joint venture, owns redeemable preference shares (RPS), which rank ahead of ordinary shareholders with respect to dividends and capital returns.
The RPS has a face value presently of $11,653,329.
Quickflix has advised that, while from a legal perspective the RPS constitutes equity, accounting standards require that it be recorded as debt in its accounts.
“Whilst Stan can only ask for redemption of RPS in limited circumstances, the company is not in a position to fund redemption and any new equity raised by the company will rank behind the RPS,” Quickflix stated.
“The existence of this right is a significant disincentive for incoming investors.
“The board and its advisors therefore believe that securing necessary investor support for an equity capital raising, including an offer to existing shareholders, is likely to be conditional on Stan agreeing to restructure the RPS.”
The RPS had been issued to HBO in March 2011, with Quickflix having at the time entered into a commercial relationship with HBO, Quickflix advised, with Nine Entertainment having acquired the preference share from HBO in July 2014 for an undisclosed amount, which it subsequently transferred to Stan.
Having restructured obligations of in excess of $7.5 million with content providers, Quickflix is seeking to reposition itself amid an increasingly competitive digital content market.
Quickflix’s recent December quarter figures show that its paying customers were down 22 per cent year-on-year, while total customers (paying customers and trial subscribers) were down 26 per cent.
