ANALYSIS:DENIS O'BRIEN'S €100 million investment plan for Independent News Media (INM) marks an attempt to seize the initiative from its chief Gavin O'Reilly following his tentative deal with banks and bond investors to settle an overdue €200 million note, writes ARTHUR BEESLEY

The response of its banks, whose exposure exceeds €1.1 billion, will be pivotal to the eventual outcome. Although much remains unclear about the contours of O’Brien’s plan, he would take a majority stake in the heavily-indebted firm and be empowered to depose its management.

By contrast, the O’Reilly plan would seriously dilute all shareholders while giving them a chance to rebuild their position in a rights issue.

O’Reilly would pay off the bulk of a €198 million outstanding bond and €15 million in accrued interest in a debt-for-equity and rights issue deal that can be executed without O’Brien’s support.

O’Brien would impose a big discount on bondholders, giving them cash upfront and a smaller equity stake while arguing that their INM shares would be held in a firm with a stronger capital base.

He sees INM’s banks as the kingmakers, going directly to them with his plan instead of to the company’s board.

Time is not on his side, however, as his approach came on the same day as INM told the market that its own deal was all but done. Still, his promise to inject €100 million in cash into INM was enough to win a hearing from the banks.

Whether they would reverse away from O’Reilly to back him remains unknown. O’Brien seems to be bargaining, however, that bank support if won would overpower bondholders and take other shareholders with him.

It’s a big ask. “Basically, we’d welcome a chance to look at a proposal if he has one. But if it isn’t materially better than his earlier position it’s dead on arrival,” said a source close to the bondholder group. In this analysis, bondholder resistance would be such that the only means of executing the deal would be through an examinership. That is strongly disputed by sources close to O’Brien.

O’Brien has lost €500 million on his 26 per cent stake in INM.

He signed up to its restructuring plan in March and had three lieutenants appointed to its board. Yet he soon fell out with O’Reilly, arguing that a deeper restructuring was needed to restore the firm’s fortunes. Having called an egm in which shareholders would be asked to back him or O’Reilly, his direct petition to INM’s banks ups the ante in the face of a new threat.

This battle is not yet won.