'Surgery' needed at IN&M before O'Brien invests further

ONE OF Independent News & Media’s (IN&M) biggest shareholders has warned the board that he is not prepared to invest additional funds in the group under the terms of its proposals to tackle its debts.

The publisher of the Irish and London Independentnewspaper titles is considering raising €60 million from shareholders as part of a plan to settle a €200 million debt it owes on foot of bonds due to be repaid on May 18th.

However, businessman Denis O’Brien, who owns 26 per cent of the media group, has told the board that the proposals are a “band-aid solution where major surgery is required”.

A spokesman for Mr O'Brien told The Irish Timesyesterday that he wanted to reiterate his commitment to helping the company "but not on the terms currently being proposed".

He added that Mr O’Brien has communicated his dissatisfaction to the board.

In a statement Mr O’Brien said he was happy to support an investment that “adequately de-levers the business” for the medium to long term.

“My fundamental concern is that if this is not properly addressed in this restructuring, with the continuing trading challenges facing the business, the company will be back looking for additional capital in six months,” he said.

“There is no point in putting together a band-aid solution when surgery is required. Any further investment must be about the future and not shoring up the past.”

In addition to the €200 million due last month, it has further debts which fall due later this year and in 2010.

INM is considering raising €60 million through a rights issue. If it were to go ahead with this and Mr O’Brien took up his rights, he would have to invest just over €15 million in the company.

He and the firm’s biggest shareholder, Sir Anthony O’Reilly, would contribute more than €30 million between them in such a rights issue.

Along with the rights issue, the company is proposing to give bondholders 10 per cent of the proceeds of a sale of businesses, valued at a total of €150 million. In addition, it wants the repayment date of the bonds extended by three years, but is willing to pay more interest than the 5.75 per cent due on these instruments.

Mr O’Brien is calling for the bonds to be repaid at a “more sensible valuation”, which more closely reflects the market value at which they are trading, which is less than 5.75 per cent.

He wants the maturity date on the company’s bonds extended by five years from their current closing dates. Mr O’Brien is also recommending that all proceeds from the sale of assets be used to pay down senior debt.

The company has been in talks with its bond holders, mainly banks and other financial institutions, since May under a “standstill” agreement that is due to end on Friday.

IN&M did not comment on Mr O’Brien’s statement.