Essel Group is in advanced talks with a consortium of investors, including James Murdoch's Lupas Systems, to raise funds via mezzanine financing that could release Zee Entertainment Enterprises Ltd (ZEEL) promoters' debt burden, sources close to the matter told CNBC-TV18.
Mezzanine financing is a hybrid of debt and equity financing that gives the lender the right to convert to an equity interest in the company in case of default.
The new consortium of investors interested in ZEEL stake purchase includes private equity firm Blackstone, investment firms Lupa Systems and Atairos, said the sources.
Sources said the above consortium of investors may be inclined to enter into a structured deal that could address promoters' debt in the company.
Subhash Chandra-owned Essel Group aims to announce a deal by the end of July, said the above mentioned sources on condition of anonymity.
The financial details of the transaction, however, could not be ascertained.
Sources suggest the parties are yet to reach a definitive agreement but all options are on the table.
Zee Entertainment Enterprises Ltd (ZEEL), in a response to CNBC-TV18 said, "The stake sale process of ZEEL is at its advanced stage. Any additional details cannot be shared at this stage due to confidentiality agreements. Essel Group is confident to close the deal well within the purview of the timelines agreed with the lenders."
Blackstone, however, denied considering any proposal related to ZEEL. It said, "“Blackstone would like to deny any market rumours of considering buying minority stakes in Zee entertainment.”
Atairos declined to comment while Lupa Systems did not respond to a CNBC-TV18’s query.
James Murdoch, the younger son of media mogul Rupert Murdoch, launched Lupa Systems, which acts as a holding company for his investments, with offices in New York and Mumbai. The name of the new company means she-wolf in Latin.
The company was created from the proceeds of the sale of the Murdoch family's stake in 21st Century Fox to Disney for $71.3 billion.
The deal, once finalised, would allow James Murdoch to re-enter the Indian media space after Murdoch-owned Star Group ended its brand association with its Indian television news channel joint venture partner in 2012.
Atairos, on the other hand, is an investment company headed by Michael Angelakis, the former vice chairman and CFO of the global media giant, Comcast.
Sources said Essel Group is considering two term sheets with regards to ZEEL stake sale: one is from the global media baron Sony, where talks have so far failed to progress over differences in valuation; the other is from the new consortium which is turning out to be a feasible option if talks with Sony fails to fructify.
Among the listed portfolios of Essel companies, Zee has the highest market-cap and is the only company with a net cash position. The current market value of ZEEL is Rs 34,600 crore.
Promoters hold 38 percent stake in ZEEL, of which 66 percent is pledged.
In November last year, the company had announced that the company will sell a part of its stake in Zee Entertainment to a global strategic investor.
Essel Group owes Rs 7,000 crore to mutual funds and a stake sale has to happen before September 2019 to avoid any default.