Cash-Strapped Australis Put Into Receivership

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Sydney, Australia -- Australis Media's United States
bondholders have put the beleaguered Australian pay TV company into receivership, ending
two years of financial instability.

The bondholders appointed accounting firm Ferrier Hodgson
as receivers and managers, Australis' board announced, after financial guarantees
made to courts in the United States were not met last week.

Those guarantees and Australis' obligations to extend
its program-supply agreement with the Hollywood studio-backed Premium Movie Partnership --
which it also failed to meet -- would have given the company Chapter 11 protection against
bankruptcy in the United States.

Australis racked up losses of around $A600 million ($US382
million) in its four-year life span. The majority of bondholders hold a total of $A674
million ($US445 million) in debt securities, which they agreed last month to reduce to
$A568 million ($US375 million), in return for an equity stake in the recapitalized and
restructured company.

A consortium called Boulos Newco -- put together by
Australis' landlord and shareholder, Mike Boulos -- was to provide $A100 million
($US63.7 million) in cash and assets, including folding wireless operator East Coast
Television into Australis.

Receiver Peter Walker said, "We are maintaining
operations here at the moment, and we'll have to put a report up to the secured
creditors that will deal with all of the options that exist." Industry sources have
suggested that those options could include revisiting a twice-failed merger with pay TV
operator Foxtel, continuing with a revised restructure, or liquidation.

What's certain is that the receivership will trigger a
long-awaited industry rationalization that is ultimately likely to see a sale of
Australis' assets, which include the $A4.5 billion ($US3 billion), 25-year
programming agreement with Foxtel.

The key to any asset realization, industry sources said, is
when the program-supply agreements with the Premium partnership become invalid. Foxtel has
negotiated a backup deal with those partners -- which include Sony Pictures, Paramount
Pictures and Universal Studios -- for supply of their product if Australis is declared
insolvent or if it stops broadcasting.

If an asset sale takes place, the Foxtel/Australis
agreement could be sold to a third party, or to Foxtel at a discount. Australis'
other assets include 70,000 subscribers; program-supply agreements with regional pay TV
operators Austar and East Coast; digital direct-to-home satellite-transmission and
reception facilities and hardware; and customer-service facilities.

The receivership also leaves the future of East Coast and
its 10,000 subscribers in eastern Australia unclear. The Century Communications
Corp.-owned company was to have been folded into Australis as part of the recapitalization
plan.

Austar managing director John Porter said,
"Today's event had been fully anticipated, and we have contingency arrangements
in place to ensure that Austar customers continue to receive the programming that they
have come to enjoy. Austar is Australia's second-largest pay TV operator, and our
independence has always been one of our greatest strengths."

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