INM bondholders ramp up pressure over €200m note failure


BONDHOLDERS IN Independent News & Media (INM) are stepping up pressure on the firm over its failure to repay a €200 million note amid signs that major investors Sir Anthony O’Reilly and Denis O’Brien remain far apart on how to resolve the problem.

Although INM has received a second extension to a “standstill” pact with its banks and bondholders, each of the competing factions is very reluctant to change its negotiating stance.

While some bondholders believe that their differences with the O’Reilly camp can be resolved, they say Mr O’Brien is overplaying his hand.

In addition to bondholders, whose money has been overdue since May, any resolution must also satisfy the company’s banks, who are owed a further €590 million due later this year and next year, and another €591 million in 2012.

Bondholders are refusing to accept INM proposals which would see their ultimate repayment cut by more than 25 per cent.

They argue that the current terms on offer would enrich INM’s shareholders, at their expense.

They are prepared to subscribe to a discounted rights issue, the consequence of which would be to radically dilute the interest of Sir Anthony and Mr O’Brien.

Shareholder resistance to such a proposal is at odds with commercial precedent, the bondholders say.

“The shareholders are not playing by the rules of European restructuring and are risking the livelihood of the employees of the company,” said a source close to the bondholder group.

“They are putting the interests of shareholders before the health of the company.”

There was no comment on these remarks from Mr O’Brien or from INM, which said the extension of the standstill was to facilitate the continuation of “ongoing and constructive discussions” between all key stakeholders.

INM shares, down more than 85 per cent in 12 months, declined by half a cent to 21½ cent yesterday. The latest standstill runs until August 27th, a day before INM publishes its interim results.

The differences between Sir Anthony and Mr O’Brien, who set aside their public dispute last March, is one of the prime complicating factors in the negotiation. Mr O’Brien wants a fundamental restructuring of the business, with loss-making units scrapped. The proposals backed by Sir Anthony are much more modest in scale.

While INM’s recent proposals would require a €15 million investment from both men, Mr O’Brien refused to sign up on the basis that the terms on offer represented a “band-aid solution, where major surgery is required”.

He has argued for further writedowns by bondholders on the basis that the current proposals are too generous to them, a stance the bondholders find unacceptable.

INM said it has “sufficient funding in place to meet all working capital requirements” during the standstill period. Referring to “recent erroneous press reports”, the company said none of its publishing assets in Ireland, Britain, South Africa and/or Australasia are being sold.

On Thursday, INM sold its 18.07 per cent interest in gaming software firm Cashcade to Party-gaming Plc for an aggregate cash consideration of some €15.3 million, net of costs. INM purchased its interest in Cashcade in 2006 for €6 million.

Early this month, INM sold off a third of its investment in Indian publisher Jagran Prakashan. The transaction raised some €22 million for use as a “cashflow tool” to pay down debt and enhance liquidity. The deal, which reduced INM’s exposure to the expanding Indian market, was interpreted as a sign of weakness.

To raise additional funds, INM is selling its South African advertising business INM Outdoor and its interest in price comparison firm Verivox.