O'Callaghan confirms EMPG restructure

Thu, Jan 14, 2010, 00:00

Businessman Barry O’Callaghan confirmed today that a group of Irish private investors in Education Media Publishing Group (EMPG) could end up owning little or nothing of the business, and said he stood to lose more than anyone else.

The heavily indebted e-learning company, formerly known as Riverdeep, is planning a major financial restructuring that could see debt levels reduced by about 70 per cent and fresh capital of about $600 million (€413 million) being injected into the business.

However, the change to the shareholder structure and could leave a group of Irish investors, who have put more than $475 million into the company in the past four years through Dublin-based stockbroker Davy, with a minimal stake.

Speaking on RTÉ Radio One's Morning Ireland today, Mr O'Callaghan, who founded the firm, denied it was in difficulty.

"The company is not in trouble at all," he said.

"The shareholders unfortunately are underwater, no different to people who bought houses back in 2006 and 2007 at the peak of the property bubble and unfortunately find themselves sitting on negative equity.

"The fact of the matter is that if you buy an asset using 70 or 80 per cent of debt, and the balance is equity, if that asset falls by 20 or 30 per cent, then obviously all that equity is wiped out."

Mr O'Callaghan said the firm had bought assets in 2006 and 2007, integrated them and turned them into a "great company", but said the asset value of the enterprise was now about 50 per cent below previous levels.

"Not only is the equity wiped out... but the bigger broader story here is that about €5 billion of value has been wiped out," he said.

"There's several billion of debt has been wiped out as part of this broader restructing.

"Unfortunately I stand to lose more than anyone else. No one in finacnial terms has lost as me," he said, adding that his losses could amount to hundreds of millions.

"Obviously at the peak in terms of paper value it's more than that," he said.

However, he confirmed the enterprise needed to be put "on a sound financial footing".

Mr O'Callaghan did not give details of the plan, but said it would bring new lines of working capital to the business. He said the majority of creditors supported the move.