ANALYSIS: The standstill pact gives INM some breathing space, but negotiations ahead will be tough, writes ARTHUR BEESLEY

NOW FOR the main event. The standstill pact between Independent News Media (INM) and its bondholders heralds a big push by the business to find a way out of a debt

cul de sac in which its repayment obligations total €1.38 billion in the next three years.

For Ireland’s largest media company – owner of the Irish Independent, the Sunday Independent, the Sunday World and numerous other titles – the process may well turn out to be a painful one with no certainty as to the extent of the concessions it will have to make.

Amid tough trading conditions for all media in INM’s main markets, dominant shareholders Sir Anthony O’Reilly and Denis O’Brien signalled their willingness to invest a total of €30 million to help refinance the €200 million bond that matured yesterday.

But that note, which INM was unable to repay or refinance, represents only the lower slopes of the mountain it must climb by 2012.

INM’s inability to offload its 39 per cent stake in Sydney publisher APN News Media last year blocked the most straightforward route to a big deleveraging of its balance

sheet.

The company has been on the back foot since then.

Although attention until now has centred on asset disposals and the likely elimination of loss-incurring businesses, INM may still have to proceed with a debt-for-equity swap with bondholders and banks.

The inevitable consequence of that would be a serious dilution of the interests held by O’Reilly and O’Brien, former rivals who have each lost hundreds of millions of euro in INM’s share collapse.

That said, the standstill provides breathing space to INM and a decent period in which it can work through its difficulties.

The firm is already in risky territory, however.

A report in the Daily Telegraph on Saturday, which said City traders were betting heavily that INM would be forced into administration due to a collapse of talks with shareholders, proved wide of the mark.

But it illustrated in stark terms the dangers associated with non-payment of debt.

The standstill allows for an extension of the period of grace, but the sooner INM makes progress, the stronger its hand will be.

The reverse is also true, so those on the other side of the negotiating table can be expected to exploit their position.

NM Rothschild and Davy are advising INM, and investment bank Houlihan Lokey is advising its bondholders.

Houlihan Lokey, whose other clients include General Motors’ bondholders, has a tough reputation.

For INM, the stakes couldn’t be bigger.