O'Reilly wins board support for €200m bond settlement plan

INDEPENDENT NEWS & Media (INM) chief Gavin O’Reilly has won board support for his plan to settle an overdue €200 million bond, after the firm’s directors rejected a refinancing rival plan from rebel investor Denis O’Brien.

In a statement issued after 9.30pm last night, INM said the refinancing deal agreed in principle with bondholders and banks would deliver on the objective of achieving a solution that was “capable of implementation outside of a court-administered process”.

Spurning Mr O’Brien’s plan, which would have seen him take a 67 per cent stake in INM in return for a €100 million investment, the firm said his approach raised “significant competition law and media plurality issues” linked to an assumption of control by him of Ireland’s largest media group.

Both Mr O’Brien and his long-time rival Sir Anthony O’Reilly, father of the chief executive, will see their interest in INM significantly diluted in the deal. There was no comment after a meeting of INM’s board yesterday from a spokesman for Mr O’Brien, who owns 26.14 per cent of the firm and has three of 10 seats on its board.

Mr O’Brien agreed in March, after years of antagonism, to work with 28 per cent shareholder Sir Anthony O’Reilly, but the deal between the two men fell apart over the summer when Mr O’Brien took issue in strident terms with INM’s negotiating stance.

The refinancing package includes a debt-for-equity swap with bondholders and a follow-on rights issue. “This restructuring will provide the INM group with a €350 million reduction in net debt in 2009 (through the combination of the equitisation of the bonds, the rights issue and the group’s previously-announced disposal programme) and a stabilised financial position,” said Gavin O’Reilly.

The disposals include the €98 million sale of South African advertising company INM Outdoor, a transaction Mr O’Brien has vowed to block and one that will be subject to a vote at a specially-convened egm.

INM said the proposed refinancing of senior debt will be based on a term of four-and-a-half years. The rights issue will raise up to €94 million for the discharge of the bond claim. “INM’s banks have indicated that they are supportive of the company pursuing this restructuring,” it said.

Bondholders will take 46 per cent of INM to meet €123 million of the outstanding principal amount of the bonds. The balance of the bondholders’ €213 million claim, including some €15 million in accrued interest, will be applied to underwrite a rights issue.

INM’s existing shareholders will be offered an opportunity to participate in the deal by means of a rights issue of up to €94 million at a price of 5 cent per share, representing a deep discount on last night’s 27 cent closing price.

As a result, INM said, existing shareholders will be able to retain some 52 per cent of their equity stake if they take up their full rights entitlements.

INM said its board “carefully considered” Mr O’Brien’s proposal and took account of the response from certain key stakeholders whose support would be necessary for its implementation.

Bondholders “stated categorically” that the proposal was unacceptable.

The company said Sir Anthony’s stake was “capable of blocking those special resolutions which would be required to implement Mr O’Brien’s proposals”, adding that he would not be prepared to support the plan.