INDEPENDENT NEWS & Media (IN&M) is seeking a “standstill agreement” from the holders of a €200 million bond due this month as it seeks to extend the maturity of the bond and a further €590 million in debt due this year and next.
Although IN&M warned yesterday of a “strong likelihood” that the business will breach its banking covenants “if an amendment or waiver is not granted by the lenders in advance”, its directors said they were confident that an agreement could be reached with its bondholders and banks.
Their declaration of confidence struck a more optimistic stance than 26 per cent shareholder Denis O’Brien, who said only a week ago that there was but a 50-50 per cent chance of success in the negotiation.
Under pressure from IN&M’s lenders, Mr O’Brien and outgoing chief executive Sir Anthony O’Reilly settled their differences two months ago.
Uncertainty around the bond led auditors PricewaterhouseCoopers (PwC) to issue an “emphasis of matter” note with their report in IN&M’s 2008 annual report. PwC said opinion was not qualified but said it considered the adequacy of the disclosures made in the financial statements concerning the directors’ confidence in INM’s ability to continue as a going concern.
“The matters explained . . . indicate the existence of a material uncertainty which may cast significant doubt about this ability. The financial statements do not include any adjustments that would be necessary if the group were unable to continue as a going concern.”
Reflecting sharp economic pressure in its main markets, the company has downgraded its profit forecast this year. Having declared in January that operating profit before exceptionals would come in between €240 million and €270 million, the company said yesterday operating profit before exceptionals to be within a range between €200 million and €230 million. “Trading in the first quarter of 2009 has been tougher than expected.”
Annual results for 2008, twice delayed, showed that operating profit before exceptionals dropped 16.9 per cent to €290.3 million, slightly ahead of a forecast in January.
However, big impairment charges on the value of its London Independent, Belfast Telegraph and APN mastheads in Australia and New Zealand led to a pretax loss of €161.4 million for the year. The basic loss per INM share was 19.9 cent. Reflecting challenges it faces in markets, INM moved in January to cancel its final dividend.
If the standstill period is agreed, INM would use the period of grace to step up its efforts to deleverage its balance and sell off assets. IN&M said yesterday that it was unable to raise new debt to fund the maturity of the €200 million bond. “The group currently does not have sufficient financial headroom available under its existing facilities in order to meet this maturity and service its debt obligations.”
Gavin O'Reilly, incoming chief executive, declined yesterday to comment on any efforts to sell off the loss-incurring Independentnewspaper titles in London.
However, Mr O’Brien said in a statement that “management needs to remain focussed on eliminating loss-making businesses”.
