IN&M on verge of refinancing deal with bondholders

REBEL INDEPENDENT News & Media (IN&M) shareholder Denis O’Brien held direct talks with some of the firm’s main banks last week as its management neared a deal in separate talks with them and bondholders to resolve an overdue €200 million bond.

Although the stance Mr O’Brien adopted remains unclear, he has been opposing IN&M’s management’s proposals to overcome the impasse on the basis that they are too generous to bondholders.

In spite of Mr O’Brien’s intervention, the banks indicated to IN&M that they will participate in a two-phase refinancing deal which will see bondholders take up to 45 per cent of IN&M in a debt-for-equity swap which will be followed by a deeply discounted rights issue.

It remains unclear whether he will seek to block execution of the likely deal, which would dilute his 26 per cent stake in IN&M to 14 per cent if he does not participate in the rights issue. Some sources say the sole means of blocking it may be to injunct the process. His spokesman would not comment.

IN&M owns about €2 million of the bonds and investors hold €198 million of the paper. Some €15 million in accrued interest is also due to bondholders. IN&M’s banks – including AIB, Bank of Ireland, Barclays, BNP Paribas, KBC Bank Ireland, Lloyds TSB and Ulster Bank – are owed €50 million this month, €540 million next year and €591 million in 2012.

The maturity on that debt would be extended by four years in exchange for a higher coupon, though the banks also want INM to raise an extra €20 million in the rights issue to repay interest.

Final agreement was said last night to be close, with a formal stock market notification possible at some point today. INM shares, down 78 per cent in 12 months, gained 2½ cent yesterday to close at 29 cent, implying a market capitalisation of €243.48 million.

Mr O’Brien has called an egm in a bid to block the disposal of South African advertising unit IN&M Outdoor, a key refinancing sale, but cannot prevent the debt-for-equity deal because INM has a reserve of 723 million authorised but unissued shares which can be issued without shareholder approval.

For resolution in final talks with banks and bondholders is the price at which those shares will be issued, with discussions centred on a range between 15 and 17 cent per share. This implies the issue of the shares would be valued at between €108 million and €123 million, leaving between €92 million and €77 million to be satisfied by the rights offering, accrued interest and the additional €20 million banks are seeking.

The rights issue, to be underwritten by bondholders, would be priced at five cent per share. This would give shareholders, including Mr O’Brien and his rival Sir Anthony O’Reilly, a chance to preserve their stakes.

Sir Anthony, whose 28.5 per cent stake would fall to 15 per cent if he did not take up his rights, is expected to back the deal.

The issue requires the approval of a simple majority of shareholders. This is likely given Sir Anthony’s support and the fact that bondholders would hold 45 per cent of IN&M at that point.