Legal action by Ten's administrators this week has unearthed two letters from its billionaire shareholders' advisers that resulted in the board calling in corporate undertakers to manage the television network and put it up for sale.

One adviser for the biggest single shareholder, Bruce Gordon's investment vehicle Birketu, also revealed his lack of confidence in Ten's management to improve its financial performance.

Letters released through Federal Court filings reveal that billionaire shareholders and guarantors, Lachlan Murdoch's company Illyria and Mr Gordon, advised the board on June 9 through Fort Street Advisors that "neither will extend, nor increase and extend, its existing guarantee in respect of the facility, nor agree to the deferral of the accrued guarantee fees".

A few days earlier, Ten provided forecasts showing withdrawals from a $200 million facility, which they were guaranteeing, would reach $147 million that week and $173 million by the week ending July 14.

"We and our clients are concerned that there are not reasonable grounds to expect continuing solvency on Ten's part," Fort Street wrote.

The letters reveal the billionaires feared Ten's insolvency and demanded written details from the board within two days justifying why they thought Ten and its subsidiaries were solvent and not at risk of default.

They estimated that Ten would not be able to repay the existing $200 million loan and this could prompt the lender – Commonwealth Bank of Australia – to declare the loan in default. This would make the three guarantors – Mr Murdoch, Mr Gordon, and James Packer – personally liable for the full amount, according to a 2013 loan agreement approved by shareholders.

The board later told shareholders this correspondence left directors with "no choice but to appoint administrators". On June 14, it officially appointed KordaMentha as voluntary administrator and a creditors' meeting was held on June 26.

That administration process has now been extended to November, after the Federal Court on Monday granted KordaMentha a 120-day extension. Ten has also been granted access to more money after the guarantors agreed it could draw down another $30 million of the CBA facility. It had used $97 million at the time of administration.

The three guarantors have applied as creditors owed $11 million each in fees. Mr Murdoch and Mr Gordon have since lodged an application with the competition watchdog to jointly buy Ten, although this is not allowed under existing media law. 

On Monday, the court also agreed to appoint an independent liquidator to investigate Ten's payments and KordaMentha's conduct, amid concerns the administrator was not independent enough due to work it did for the network prior to its appointment as administrator.

This court action prompted a series of emails between Arnold Bloch Leibler lawyer Leon Zwier and Mr Gordon's lawyer and adviser, John Atanaskovic, over the weekend of July 15-16.

What past 'success' was there at Ten in recent years, and how could it therefore be 'continued', and how was it being 'ensured'?

Lawyer John Atanaskovic

Mr Atanaskovic's email reveals the thinking in Mr Gordon's camp before he decided not to guarantee any more funding.

In particular, Mr Atanaskovic questions Mark Korda's statement in an affidavit that Ten was working on several projects "in an attempt to restructure the business to ensure its continued success" and that these projects were progressing well until Birketu and Illryia withdrew their guarantees.

"What past 'success' was there at Ten in recent years, and how could it therefore be 'continued', and how was it being 'ensured'?" Mr Atanaskovic asked Mr Zwier on Sunday.

"Indeed, the shareholder guarantors were at least justified in seriously questioning ... whether substantial achievement of what was planned was at all assured (especially given past performance of management and the board, and the massive losses incurred by the Ten group over time, including in recent years)."

He then questioned why Ten did not tell the market earlier that the third guarantor, Mr Packer's Consolidated Press Holdings (CPH), had withdrawn its guarantee. According to the Fort Street letter of June 12, there was prior confirmation from CPH it would not provide further guarantees.

"Mark [Korda] mentions two of the shareholder guarantors here, but fails to mention both (i) the formal indication already some weeks earlier ... of the unpreparedness of a third of the shareholder guarantors to extend or increase its guarantee, and (ii) the unexplained failure by Ten at the time to disclose this publicly (as at least arguably required pursuant to ASX and statutory continuous disclosure rules)."

Mr Atanaskovic also raised concerns about the extra cost of an investigative liquidator and the "rather closed community" of Australia's insolvency industry.

"My mind also strayed to President Trump's tendency towards allowing his official office to be used to assist his family and their respective businesses," he wrote.

Court orders

Despite these concerns, Justice David O'Callaghan of the Federal Court in Melbourne on Tuesday agreed to an order jointly submitted by Mr Zwier and Stewart Maiden, who is acting for the Australian Securities and Investments Commission (ASIC).

Under the order, Ferrier Hodgson partner Peter Gothard will prepare a report for the second creditors' meeting that includes investigating whether Ten made any preferential payments in the six months prior to administration.

Justice O'Callaghan ordered Mr Gothard to supervise KordaMentha's conduct "so as to satisfy himself that [they] are acting consistently with their statutory duties and fiduciary obligations as administrators".

He also confirmed KordaMentha were "justified in remaining in their role as the appointed administrators in the administration of the Ten Group Companies", removing any suggestion creditors or regulators might apply to have them replaced.

Perception of bias

The court has heard ASIC agreed to the independent investigation because it was concerned about perceptions of bias if KordaMentha were allowed to conduct the investigation, as administrators normally would.

This is because KordaMentha was engaged and paid nearly $1 million by Ten's law firm Gilbert + Tobin "when the clouds of insolvency were gathering on the horizon", Mr Maiden said.

Mr Maiden argued KordaMentha might be reluctant or uncomfortable to investigate whether Gilbert + Tobin received preferential payments, which would have to be repaid if Ten went into liquidation. All parties agreed that appointing Ferrier Hodgson to conduct the investigation would remove concerns about independence.

The court also allowed KordaMentha to communicate with creditors by email where possible. The administrator told the court it would cost almost $12,000 to print the 70-page report for 1094 creditors. The postage alone for the first creditors' meeting cost about $1641, including priority stamps.

Independence concerns

Meanwhile, an affadavit filed by Mr Korda has revealed details about his appointment, and subsequent concerns raised about his firm's independence.

For example, while KordaMentha had been working with Ten since February, the board's decision to appoint an administrator was made quite suddenly.

Mr Korda was contacted on the morning of Tuesday, June 13, the first business day after the Fort Street letters arrived, and flew to Sydney that day. After a board meeting on the morning of June 14, he quickly drafted a declaration of independence, relevant relationships and indemnities (DIRRI).

However, within a few days, Melbourne-based liquidator Adrian Hunter complained to the Australian Restructuring Insolvency and Turnaround Association (ARITA) that the DIRRI was insufficient.

ARITA in turn shared its concerns with ASIC, which suggested KordaMentha revise the DIRRI. It did so on June 22 with a list revealing dates and details of 51 meetings KordaMentha held with Ten, including 11 meetings with directors. Mr Korda's affadavit of last week clarified KordaMentha staff visited Ten's offices just five times while the rest of the meetings were either teleconferences or conducted in Gilbert + Tobin's offices.

Despite the updated DIRRI, ARITA referred KordaMentha to its Professional Conduct Committee (PCC) on July 3. KordaMentha formally responded to the concerns 10 days later, including requesting the court appoint Mr Gothard as independent investigator. It is unclear if the PCC investigation will continue now an independent investigator has been appointed.

Adviser bonanza

Mr Korda's affadavit also reveals the extent of advisory work generated by Ten's financial troubles.

The network itself hired six advisory firms (not including KordaMentha, which was hired by Gilbert + Tobin). These include: Moels & Co for advice on turnaround and distressed assets; Gilbert + Tobin for legal advice; Citi for financial advice; McKinsey & Co on a transformation plan; PricewaterhouseCoopers on tax and auditing; and Mark Clifton, a specialist from Herbert Smith Freehills on corporate distress.

Meanwhile, Commonwealth Bank, which provided the $200 million loan facility due on December 23, has been advised by two legal firms, Allens Linklaters, and King & Wood Mallesons. CBA appointed PPB as receiver of that debt on July 1.

And the three shareholder guarantors also retained their own advisers. Ben Keeble and Jim McKnight from Fort Street advised both Mr Murdoch and Mr Gordon, while the latter also received advice from Mr Atanaskovic.

Mr Murdoch consulted Australian legal firm Henry Davis York, and international firm Allen & Overy. And Mr Packer relied on advice from James Marshall at Ashurst.