INDEPENDENT NEWS & Media (INM) investor Denis O’Brien hopes to receive waivers from the legal requirement to mount a mandatory bid for the firm if he takes a majority shareholding in the business as per his €100 million investment proposal to its banks.
His plan, which seems certain to be strongly resisted by INM and its bondholders, came on the same day as the heavily-indebted firm told the stock market that it was on the cusp of a deal to resolve an overdue €200 million bond.
Mr O’Brien’s proposal stands as a direct challenge to INM chief Gavin O’Reilly, who led its four-month negotiation with bondholders and banks. In addition to Bank of Ireland and AIB, the lenders include Barclays, BNP Paribas, KBC and Lloyds TSB.
Under INM’s proposal the full liability to bondholders would be met by a debt-for-equity transaction in which bondholders took 45 per cent of the company, and proceeds from a follow-up discounted rights issue in which shareholders would be offered an opportunity to rebuild their stake.
The deal, specifically structured to neutralise Mr O’Brien’s resistance to Mr O’Reilly’s proposals, still requires support from INM’s board. In a lunchtime statement, the company said the plan was likely to include a significant extension on maturities of available senior debt and revised covenants.
In its statement INM said the current terms assumed no other viable proposals are advanced by lenders or the bond holders. By the time of its release, however, Mr O’Brien’s associates were already in direct talks with its banks about his alternative plan.
Mr O’Brien proposes to back a vehicle called RescueCo which would inject €100 million of his money into INM. He would acquire a majority equity stake in this way, relying on legal waivers to avoid a mandatory bid.
Sources close to Mr O’Brien said the question of whether other shareholders including his rival Sir Anthony O’Reilly – Gavin O’Reilly’s father – would be able to participate in his plan was “not an open and shut case” and would be dealt with in due course.
“He has not made a bid. He has tabled a detailed restructuring plan to the banks,” said the sources. His intention, they added, was that the plan would become the “company proposal” in time. This means Mr O’Reilly’s plan would have to be shelved.
While RescueCo’s €100 million would be divided between the company and an upfront cash payment to bondholders, the exact split remains uncertain and was discussed yesterday with the banks.
Bondholders would receive less equity under the plan, although the sources argued that the equity would be in a better-capitalised company. Bondholder sources rejected this, saying any discount to their liability was unacceptable.
RescueCo, which would remain listed on the stock market, would abandon the sale of South African outdoor advertising company INM Outdoor and dispose of the London Independent daily and Sunday newspaper titles.
INM said it has received no proposal. Company sources questioned Mr O’Brien’s assumptions, arguing that INM’s plan will significantly advance its deleveraging.
