New equity issue would give INM bondholders 46% stake

Independent News & Media’s (INM) bondholders could end up owning more than 75 per cent of the media company if a proposed €92.2 million rights issue were not to proceed or shareholders did not take up their entitlements.

This is revealed in a circular released by INM yesterday in relation to an extraordinary general meeting of shareholders on November 26th. The egm has been called to seek approval for a financial restructuring of INM following its inability to redeem €200 million worth of bonds.

INM will seek approval to issue new equity to the bondholders that would give them ownership of 46.3 per cent of the Irish company. The new shares would have a value of €122.9 million.

In addition, a rights issue aimed at raising up to €92.2 million is also proposed. INM will also seek approval for the sale of its outdoor business in South Africa.

According to the circular, the bondholders would end up owning 76 per cent of INM’s equity in the event of “no subscription under the rights issue”. This seems an unlikely scenario given that the shares are being offered at just 5 cent, a 75 per cent discount to its current price of 20 cent.

Rebel shareholder Denis O’Brien has requisitioned a separate egm to be held on November 13th to try and prevent the board of INM from issuing new shares – a move that could scupper the rights issue. Mr O’Brien is opposed to the INM board’s proposed restructuring of the business. It is understood that Mr O’Brien presented yet another alternative plan to the group of bondholders on Monday.

This was his fourth attempt to block a deal agreed between the bondholders and INM’s chief executive Gavin O’Reilly.

It is not clear if the bondholders are prepared to support Mr O’Brien’s latest proposal. Mr O’Brien, who owns 26.36 per cent of INM, yesterday failed to gain sufficient support for two resolutions at an egm he had requisitioned.

The resolutions sought to remove Brian Hillery as chairman and appoint a new senior independent director to replace Baroness Margaret Jay. Both were defeated by a two-to-one majority. When the votes of Mr O’Brien and the O’Reilly family were excluded, 98 per cent of other shareholders voted against the resolutions.

The meeting was attended by Lucy Gaffney and Paul Connolly, two of the three INM directors appointed by Mr O’Brien. The third, Leslie Buckley, did not attend. Neither Ms Gaffney nor Mr Connolly spoke at the meeting, in spite of a request from one INM shareholder for them to explain the reasons behind their resolutions. The meeting, held at the Green Isle Hotel in Dublin, was chaired by INM non-executive director Ken Clarke, a British Conservative Party MP and member of the shadow cabinet.

Speaking after the meeting, Gavin O’Reilly, INM’s chief executive, said he was “pleased” by the outcome of the votes. “It’s an endorsement of the board’s position for all shareholders,” he added.

Mr Hillery said: “We are pleased at shareholders support at the egm. This is a critical juncture for the company as we seek to restore financial stability.”