INDEPENDENT NEWS & Media (IN&M) has defied key investor Denis O’Brien to enter a deal to sell off its South African outdoor advertising unit to Helios Investment Partners, a private equity company.
Sources familiar with the sale process said the 1.1 billion rand (€98.29 million) transaction would be subject to the approval of banks, bondholders and shareholders.
Mr O’Brien, who owns about 26 per cent of IN&M and has three representatives on its board, publicly declared his opposition last month to any sale of the South African business, known as IN&M Outdoor.
IN&M declined to comment and it was unclear last night whether the deal would be finalised in time for it to be made public when it releases interim results this morning.
In a stock market statement late yesterday, the company said its bondholders and banks have signed up to a third extension of a “standstill” pact over an unpaid €200 million bond. Following a downgrade last June of the company’s own profit forecast, the results are widely expected to reflect economic pressure and weakness in the advertising business in each of its main markets.
There has been no public change to Mr O’Brien’s position in relation to IN&M Outdoor since he argued in an interview with a Sunday newspaper that the unit’s growth prospects were too good to let it go.
That stance met with some surprise within IN&M as the unit was already on the market at the time Mr O’Brien’s associates joined the board in March when he cast aside his differences with former IN&M chief Sir Anthony O’Reilly. The rapprochement is perceived to have come under some strain since then as IN&M struggles to find a formula for a wide-ranging financial restructuring acceptable to Mr O’Brien and the company’s bondholders and banks.
Mr O’Brien has publicly resisted many of the proposals favoured by IN&M and its bondholders and banks, arguing that the bondholders should take more pain. He has also said that examinership is an option for the company.
Having defaulted on the €200 million bond last May, IN&M faces a deadline next month for the repayment of €50 million in bank debt. Even if the IN&M Outdoor deal is approved, it is not clear whether the proceeds from the sale would be available in time to repay the bank debt.
IN&M has been seeking an overarching deal with banks and bondholders to extend the maturity of its debt while raising money by way of a discounted rights issue in which Mr O’Brien and Sir Anthony would participate.
However, Mr O’Brien has argued that the solutions on offer represented a band-aid solution where major surgery was required. Sources close to the bondholder group have said they had formed the view, in light of public statements made by Mr O’Brien, that there was little prospect of securing his agreement.
The latest standstill runs until September 25th and is perceived as a final opportunity for all sides to reach agreement. In addition to the €50 million that falls due in September, IN&M’s banks are due a further €540 million next year and another €591 million in 2012. The bank borrowing are categorised as senior debt.
IN&M bondholders would therefore go to the back of the creditors’ queue if there was a default on the bank debt, as their debt is unsecured.
The bondholders’ willingness to participate in a new standstill suggests they do not want to risk calling in the debt at this point.
