INM set to cut debts by more than two-thirds after deal with banks
Revamp will see job cuts, asset sale, restructure of pensions and €40m new equity
INDEPENDENT News & Media announced a deal with its lenders to slash its debt pile by more than two-thirds in return for the sale of the South African unit, a new share issue and further restructuring which will cut the company's workforce by 10pc.
The plan aims to cut debt to about €118m at end of the year from a net debt of €422m at the end of 2012, with the company's eight banks writing off as much as €138m.
The proceeds of the already-agreed sale of the South African business will also be used to pay down debt by about another €160m.
A further €40m will be raised through a share sale, while more debt will be wiped out following a deal to revamp the company's indebted pension scheme.
"The proposed process is complicated and will take time," Davy Stockbrokers said yesterday. "However, if successfully completed, it should put INM on a much firmer financial footing."
INM, the publisher of this newspaper as well as many other titles in the Republic and the North, has been struggling with high debts for years after expanding overseas during the boom.
Yesterday's agreement with the publisher's eight banks sets out a plan for the first time to cut debt to levels that will ensure the company's survival if all sides agree to the changes.
The plan will also leave INM as a smaller company with a focus on newspapers and online operations on the island of Ireland and a 29pc shareholding in Australian media company APN.
"This deal really gets us to an endgame where we've a core debt that's very manageable and have the funding in place to reposition the group for the structural challenges that all media companies are facing," chief executive Vincent Crowley said at a press conference.
Ireland's biggest newspaper publisher must now seek approval from regulators in South Africa to sell its titles there.
INM is also set to begin talks with staff at its Irish titles which are aimed at cutting the workforce in its titles across Ireland by 100 employees through a voluntary redundancy programme.
More talks will be held with trustees of the company's four pension schemes aimed at reducing the deficit in the schemes.
This is likely to mean that staff on defined benefit schemes are set to retire with pensions below what had been hoped.
INM will then ask existing shareholders to subscribe to a new share issue aimed at raising €40m.
The company's banks will then write down debt if the share issue is completed, along with the sale of the South African unit and a deal on pensions and restructuring.
Shares in Independent News rose as much as 7.4pc in intraday trading to 0.38 cent after the announcement but pared gains later in the day as news of the Bundesbank's testimony to the German constitutional court rattled markets around the world.
INM's bankers are Allied Irish, ANZ Banking, Bank of Ireland, Barclays, BNP Paribas, KBC, Lloyds and Ulster Bank. The lenders will end up with a minimum 11pc stake in the company if the accord is completed and could possibly end up owning as much as 15pc, Mr Crowley added.
They will take control of 70pc of the company if the capital raising does not go ahead.
The publisher also released full-year results yesterday and predicted that the Irish economy would remain weak for sometime.
"Trading conditions since year-end have continued to be very challenging, with most categories of advertising continuing to experience very tough market conditions," Mr Crowley said as he revealed sales of €539.7m for the year on operating profits of €59.7m.