It’s been a busy week for listed company Independent News & Media (INM). Last weekend it led a boardroom coup at its 28.95 per cent affiliate in Australia, APN News Media, staving off a rights issue that it couldn’t afford in the process.
Former INM director Peter Cosgrove has taken over the chairmanship, and the Irish company is now well placed to influence future events at at the Sydney-based media group.
It then announced the sale of its South African newspapers for 2 billion rand (€168 million) on Monday. This is a long way removed from the valuations that were knocking about last April, when the sale process kicked off.
Back then, the expectation was for something between €275 million and €325 million.
A weak rand and other factors mitigated against this being achieved.
The valuations are important because of the knock-on effect that the sum achieved from the South Africa sale has on the group’s negotiations with its banks and its ability to finance further redundancies and to provide some capital for the ailing pension scheme.
INM is currently in talks with a syndicate of banks on its €400 million-plus debts. The consortium includes Bank of Ireland and Allied Irish Banks. My information is that Bank of Ireland is not part of the co-ordinating committee that is negotiating with INM and that the overseas banks in the syndicate are leading these talks. Using the net proceeds from the South Africa sale will reduce its net debt to about €250 million.
INM has talked about getting the debt-to-earnings ratio down to below three times in the medium term.
With South Africa gone, the Irish business will probably achieve ebitda (earnings before interest, tax, depreciation and amortisation) of €45 million at best. This would suggest a debt level of €135 million or thereabouts and imply that it needs to reduce its debts by €115 million.
The banks are believed to have full security over the assets of the business, which gives them a strong hand to play.
An equity issue is problematic for the company given that O’Brien would probably be the only shareholder willing to follow his money.
O’Brien is at the maximum 29.9 per cent stake that he can hold without making an offer for the entire business. He would require a so-called whitewash dispensation to enable him to hold more shares.
On Wednesday, INM’s chairman Leslie Buckley described the talks as “constructive”. Buckley and O’Brien have demonstrated considerable skill in the past in raising funds and negotiating with capital markets via their involvements in Digicel and Esat. Resolving INM’s finances could prove to be their trickiest negotiation yet.
