Leading banks could end up owning part of newspaper publisher Johnston Press as part of a deal to tackle the company’s £306m debt, say reports.
According to reports in several national newspapers at the weekend, the company has entered negotiations with its lenders over a possible refinancing package.
The publisher is said to have hired Rothschild, the investment bank, to coordinate discussions with creditors including Barclays and Royal Bank of Scotland.
It could see the two banks taking ‘warrants’ in the company which would give them the right to buy shares in it at reduced prices, according to the reports.
Over the past year JP has reduced its debt from £351m to £306m partly by dint of a huge reduction in staff numbers.
During 2012, 1,300 jobs were lost resulting in a saving of £37.6m, and last month the publisher announced an enhanced voluntary redundancy scheme in what is being seen as a further attempt to reduce headcount.
The last refinancing package was agreed in April 2012 with lenders agreeing to finance its debt until September 2015.
Under the terms of that deal, the company was committed to repaying at least £70m a year in debt until then.
Johnston Press has declined to comment on the reports, which first surfaced in the Sunday Times and have since been followed up by various other national media outlets.
Meanwhile a former regional editor turned media commentator has repeated his call for JP and other big newspaper publishers to be allowed to make an “orderly default” on their debts.
In his Nuffield Lecture on the future of the industry two years ago, Neil Fowler said that both the lenders and the businesses themselves needed to accept that paying off the debts was “almost impossible.”
Commenting on the latest development, Neil told HTFP: “JP seems to have finally concluded that its debt position is unsustainable, in the same way that Dunfermline Press did in July last year when it radically renegotiated its borrowings with Lloyds.
“It clearly has to find ways of keeping more cash in the business – and this can only be achieved if those owning the debt are willing to take a potential hit.
“As I said at the time, the debt-holders are better to own a smaller amount of something rather than a great deal of nothing – which is what will happen if JP can’t strike a deal that offers some long-term hope.
“My recommendation that some of the major regional businesses should look to negotiate their way out of debt problems was received with a fair amount of cynicism at the time. I still believe it is the single most important action they can do in order to have sort of future.”
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Repay £70m per year! Wow!
No wonder they are struggling.
What happens when staff cutting is no longer an available option?
You can keep doing that forever!
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This seems logical to me. Many JP papers are profitable, but with such drastic staff reductions (and more to come), it will become increasingly difficult to produce them. It seems the only way to pay back the debt will be to give JP the refinancing which will allow it to retain the staff it realistically needs. (And, as a consequence, keep them spending, thus aiding the local economy and generating more advertising). It still infuriates me to think of the management that created such outrageous debt then leaving with huge payouts.
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Never mind all this HTFP…..why hasn’t there been a ‘news’ story from The Cornishman newspaper for the last five weeks? #slipping
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Or just break it up and see what the titles fetch on the open market.
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I thought they had accepted a £30m payment from news international to get out of a lucrative contract. Share price is diving again!!
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The future is looking very bleak indeed for JP and the people responsible for it’s impending demise are well out of it enjoying their massive payouts.In fairness to Highfield, he has at least tried to turn it around by implementing some radical new ideas but I feel the end of the road is fast approaching. It’s sad to see what was once a fantastic company totally ruined over the years by corporate greed and stupid decisions made by a series of inept CEO’s and their henchmen. The remaining assets will be gradually sold off and the banks will call the shots if this deal goes through. God help the staff who are left.
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Newspaper advertising is going out of fashion.
The problem with JP is they are behind others with digital products plus the way they treat there staff is laughable.
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