Boomerang takes over Postman Pat-owner Entertainment Rights

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The Independent Online

Shareholders will receive nothing under the terms of the deal and it is understood that the lending bank HBOS has taken a significant "haircut" – or reduction in the face value – on the company's outstanding debts.

Entertainment's levels of debt had crept up to £150m this year, according to banking sources, who said that the terms of yesterday's deal could see it lose between 50 per cent and 70 per cent of the outstanding debt.

The company announced yesterday that Deloitte had put it into a pre-pack administration. Technically, Boomerang, backed by the US private equity group GTCR, bought the US and UK trading operations out of the group. The remaining shell will be wound down by Deloitte.

The deal from Boomerang's side was led by Eric Ellenbogen and John Engelman, who sold Entertainment their company Classic Media for £107m in 2007. The deal is believed to have contributed heavily to the group's debt burden and forced write-offs of £83m.

One source close to the deal said: "Eric and John have done well. They left Classic when they sold it for good money, and have now bought it back, for less." Before the Classic deal, the company was worth £267m, before falling to £950,000 at the close on Tuesday.

Nick Edwards, a partner at Deloitte, said the Entertainment board had explored a series of "strategic options" over the past six months. These included potentially restructuring or refinancing the company's debt, an equity raising and selling all or parts of the business. "Despite the financial support of the Group's lender through this period, it has been unable to achieve a solvent restructuring of the company," he added.

Entertainment, which bought Postman Pat for £5.1m in 2001, also owns the rights to brands including Rupert Bear, Basil Brush and He-Man.

The takeover will save all the 90 employees at the group across offices in London, New York and Nashville. They will move to Boomerang on completion of the deal.

The group announced it was "vigorously" exploring the options available to stabilise the business and secure its long-term future at the end of February. It said at the time it was in "advanced negotiations with a number of bidders who have substantially completed their due diligence in order to complete a transaction imminently". Those thought to be interested included Hit Entertainment, Cookie Jar Group and De Agostini of Italy.

Entertainment Rights made it clear at the time that none of the offers would result in value being placed on the shares. In December, the chief executive Nick Phillips quit after nine months in charge. His replacement, Deborah Dugan, announced a cost saving plan but the group was then hit by the collapse of Woolworths, one of its biggest customers in the UK.