The fate of Ireland’s largest print media group, Independent News and Media is currently being thrashed out behind closed doors between the bankers propping up the group and its management, and the latest speculation is that loans to the group will be converted to ordinary shares. The group had over €420m of loans at the end of June 2012 which are owing to eight banks. Recent press reporting has suggested that state-owned AIB is owed €70m and that Bank of Ireland, in which the State has a 15% stake via ordinary shares, is owed €80m. On the other hand, shares in IN&M are today trading at 3.5c which values the total equity at just €19m, a fraction of what it was worth a year ago when IN&M was de-OReillyed and an even smaller fraction of its €1bn+ valuation at peak in the mid 2000s. It is understood that controversial figure Denis O’Brien presently has a 29.9% stake in the group – a stake valued at less than €6m at today’s prices – and that fellow billionaire Dermot Desmond owns 6.4% and that Tony O’Reilly and family own 13.3%.
There has been unconfirmed speculation, that as part of a restructuring of the group – which will incidentally see members of the group pension scheme take big hits – that the banks may write off €100m of their debt. There has also been speculation that as part of the deal, that the main shareholder Denis O’Brien might inject additional capital, some sources have suggested as much as €50m, into the group.
The group is in dire financial straits, having a fully recognized loss of €177m for the first six months of 2012, and a balance sheet that was insolvent to the tune of €200m at June 2012.
So, what will a debt for equity swap mean for the existing shareholdings?
We await details but given that 100% of the equity is today worth a measly €19m on the stock market and that the speculation is that the group needs to see a reduction of €100m in bank debt, you might expect the existing shareholders to be completely wiped out as part of any swapping of debt by the banks. If existing shareholders inject additional capital, then that might change the mix, but the new capital injection would have to be substantial. Minister for Finance Michael Noonan recently refused to confirm that AIB would seek equity losses ahead of any debt write-downs. In a deal involving Irish services company Siteserv last year, Anglo Irish Bank controversially wrote off €100m of debt in a deal which saw shareholders walk away with €5m. Denis O’Brien was associated with the buyers of Siteserv and it was subsequently reported that Anglo also wrote off debt. More recently, IBRC has reportedly written off €64m in a British fuels company, Blue Ocean Associates in a transaction also involving a sale to interests associated with Denis O’Brien.
The results at IN&M for full year 2012 were seemingly due in March 2013, but there is presently no calendar for their release on the IN&M website; in 2012 the results were released for full year 2011 on 22nd March 2012 . IN&M issued a statement earlier this week, merely confirming that discussions with its lenders were continuing.
Any deal will be closely scrutinized because (a) it involves our largest print media group (b) it involves Denis O’Brien and (c) it involves two banks which we either own or have a stake in.