Independent News & Media has announced plans to reduce its high debt levels through a rights issue to raise €103 million and the sale of its British regional newspaper business for €88 million.
In addition to the disposal and rights issue, the media group expects to raise a further €59 million in the coming months through the sale of some of its non-core assets and/or the refinancing of existing financial instruments.
"The net effect of this will be to inject at least €250 million in fresh funds into the business, which will radically reduce Independent News & Media's core net debt," the company said.
It expects to reduce the debt from €816 million at the end of 2002 to €566 million. If APN net debt of €407 million is included, group net debt will fall from €1.2 billion to €973 million.
Investors and analysts welcomed the move to tidy up the balance sheet, saying it provided a clean slate for the company.
"It is an acknowledgement that the company has been criticised for its balance sheet issues. They have rectified that and it should be off the agenda now," one fund manager said.
Independent is selling the British regional newspaper business, which comprises 29 paid-for and 16 free weekly publications, to Newsquest, a subsidiary of US media group Gannett.
The business generated pre-tax profits of €6.9 million on turnover of €27 million last year.
Independent said the sale price of £60 million sterling (€88 million) represented "an extremely good" EBIT (earnings before interest and tax) multiple of 13.7 times. If it receives regulatory approval, the sale is expected to be completed by the end of June.
Independent would not say which non-core assets it might sell to raise the balance, although its 50 per cent stake in cable operator Chorus is on the market. However, chief operating officer Mr Gavin O'Reilly defined non-core assets as those not consolidated on its balance sheet.
Aside from Chorus and mobile phone services provider iTouch, to which the company remains committed, such assets include Portuguese newspaper interests, its Sunday Tribune stake and its joint-venture interest in the Star.
Under the terms of the rights issue, shareholders can subscribe for four new shares for every 15 shares held at a price of €0.70, a 44 per cent discount to Tuesday's closing price of €1.25 per share.
Independent executive chairman Sir Anthony O'Reilly indicated that he would take up his full entitlement at a cost of around €28.7 million.
Shares in the company fell to €1.10 yesterday on news of the cash call but bounced back to close five cents weaker at €1.20.
Merrion Stockbrokers estimates the dilutive impact of the rights issue will reduce its earnings per share forecast this year from around 12.8 cents to 12-12.4 cents per share.
However, the recapitalisation programme should see the company's gearing fall from 150 per cent to 100 per cent following the injection of funds, according to Merrion analyst Ms Niamh Brodie.
Independent said it would also facilitate the group in securing more cost-efficient financing for the future and, in the longer term, it would put the group in a better position to look at acquisitions.
Following the cash injection, the group, whose debt has no rating, expects to move to investment grade, which should help it to raise finance on better terms.
Independent has some €170 million in preference shares due this year, which it hopes to refinance with similar instruments but on a more favourable basis.
:quality(70)/cloudfront-eu-central-1.images.arcpublishing.com/irishtimes/VR3765MFOBH2NMV2QNICYDF67M.png)