Regional publisher Johnston Press has announced it is ending its attempts to find a buyer for the company and placing itself in administration.
The 251-year-old company, which publishes more than 200 local and regional titles along with national daily the i, put itself up for sale last month after failing to come up with a way of refinancing its £220m debt.
But the company has now concluded that none of the offers delivered enough value to enable it to pay back the debt and has ended the sale process.
The JP board has now announced its intention to file for administration with a view to a pre-packaged sale to the holders of the debt in what in effect would be a debt-for-equity swap.
The largest bondholder is a New York hedge fund, GoldenTree Asset Management, which is now expected to control the newly-incorporated company, although chief executive David King looks set to stay in his role for the time being.
But although the proposed sale, which expected to be concluded within 24 hours, will wipe out the debt, the company’s pension scheme will not transfer with the rest of the business.
The Pension Protection Fund, a ‘lifeboat’ scheme set up by the government to provide pension benefits to members of schemes whose sponsoring employers have become insolvent, will now be notified of the latest developments and will assess whether the scheme needs to enter the PFF.
Johnston Press announced the move in a statement issued shortly after 9pm on Friday evening.
It said: “This is the best remaining option available as it will preserve the jobs of the group’s employees and ensure that the group’s businesses will be carried on as normal.”
But shares in the company, which had rallied earlier this week at the prospect of a deal for the i, are now worthless and will no longer trade on the London Stock Exchange from Monday.
It means the value of the 25pc stake in the company owned by the Norwegian investor Christen Ager-Hanssen, the group’s biggest shareholder, has effectively been wiped out.
In a letter to staff, Mr King said the company’s operations would “continue uninterrupted” and that they should “turn up for work as normal.”
“If this deal is approved, the debt will be produced, new money will be provided by the new owners, and the business will be in a more stable position,” he wrote.
“We are very confident that this is not the end of the story, but the beginning of a new phase in which we work with the new owners of the group to give shape to a new future.
“As the intended leader of the proposed new company I will be in touch again as soon as possible over this weekend to update you on the progress towards our goal of securing the future of the business for everyone.”
In his letter, Mr King revealed that offers had been been made both for the whole company and for individual titles.
But he added: “None of these offers, or combinations of offers, would have raised enough money to repay the £220m debt that we are obliged to settle in June 2019.”
Without mentioning Mr Ager-Hanssen by name, he also revealed that attempts to interest the group’s largest shareholders in buying the company had come to nothing.
“Despite our attempts to engage, none of our shareholders has made any proposal to Johnston Press regarding the restructuring or refinancing of the bonds generally or submitted bids as part of the FSP,” he added.
The National Union of Journalists has called for “meaningful guarantees” to protect jobs and titles across JP but described the loss of the defined benefit pension scheme as a “serious blow.”
Johnston Press PLC announces the end of the Formal Sale Process, an intention to file for administration and effect a sale to its bondholders.
- Following considerable interest in the Formal Sale Process, the Board has concluded that none of the offers the Company has received deliver sufficient value and has ended the Formal Sale Process.
- As a result, the Board has concluded that there is no value in the ordinary shares of the Company.
- The Board has resolved that the best remaining option is for the Company and its principal subsidiaries to be placed into administration.
- It is envisaged that, subject to administration orders being made, the Group’s businesses and assets will then be sold to a newly-incorporated group of companies controlled by the holders of the Bonds.
- The defined benefit pension scheme will not transfer. The Pension Protection Fund will be notified and the PPF, with the assistance of the Trustees of the Scheme, will then assess whether the scheme needs to enter the PPF.
On 11 October 2018, the Company announced that its board of directors (the “Board”) had decided to seek offers for the Company pursuant to a Formal Sale Process (the “FSP”) in accordance with the City Code on Takeovers and Mergers (the “Code”). The FSP has attracted considerable interest, including several indicative offers from interested parties.
However, after careful consideration of those indicative offers with assistance from the advisers to the Company’s group (the “Group”), the Board has concluded that none of those offers would result in net proceeds sufficient to enable the Group to repay the amounts owed by it in respect of its senior secured notes (the “Bonds”). Based on the valuation of the Group implied by those offers and given the level of liabilities in the Group, the Board has concluded that there is no longer any value in the ordinary shares of the Company.
As announced previously, the Company has conducted since March 2017 a thorough Strategic Review of financing options in relation to a refinancing or restructuring of the Bonds. During this time, the Company explored with its key stakeholders all the potential options available to it. This included the FSP, a third-party debt refinancing, a Regulated Apportionment Arrangement (“RAA”) in respect of the Group’s defined benefit pension scheme, and a consensual debt-for-equity swap. However, the value of the Group against the size of its liabilities has meant that it has not been possible to find a solution acceptable to our financial stakeholders.
Therefore, the Board has concluded that it is necessary for the Company and its principal subsidiaries to be placed into administration. Accordingly, the boards of directors of the Company and each of those principal subsidiaries will be applying immediately and on an urgent basis to the courts in Scotland, England, and Northern Ireland (as applicable) for administration orders in respect of those companies.
It is envisaged that, subject to the orders being made, all of the Group’s businesses and substantially all of the Group’s assets will then be sold to a newly-incorporated group of companies controlled by the holders of the Bonds. Holders representing the required majority of the Bonds have contractually agreed to support this transaction. The Group believes this is the best remaining option available as it will preserve the jobs of the Group’s employees and ensure that the Group’s businesses will be carried on as normal. The Group hopes that this transfer will be completed within the next 24 hours.
The Group operates a defined benefit pension scheme (the “Scheme”) and, following formal notification by the Administrators to the Pension Protection Fund (the “PPF”), the PPF, with the assistance of the Trustees of the Scheme, will then assess whether the Scheme should enter the PPF. If the scheme enters the PPF, the PPF will provide members with pension benefits from retirement based on the PPF compensation rules. Any defined contribution pension schemes in which the Group participates, which cover the majority of the Group’s current employees, should not be affected.
As a result of the above, the Board has concluded the FSP and the Company confirms that it is no longer in an offer period under the Code. In addition, the Company has requested the suspension and subsequent cancellation of the Company’s ordinary shares from listing on the premium segment of the Official List of the UK Listing Authority and from trading on the Main Market for listed securities maintained by the London Stock Exchange plc. The suspension is expected to take place with immediate effect with cancellation expected to follow on Tuesday, 20 November 2018, at 8:00 a.m. (London time).
This announcement contains information that is inside information for the purposes of Article 7 of Regulation 596/2014. Upon the publication of this announcement, the inside information contained in this announcement will no longer be considered inside information.
Message to staff from JP chief executive David King
I said I would update you with any news around the Formal Sale Process (FSP) process and future of Johnston Press. I am aware that it’s your weekend, but I am now in a position to tell you more.
As you know, the board of directors has been undertaking a Strategic Review for some time, in order to find a way to deal with our historical debt and pension obligations.
That process is reaching a conclusion this weekend. We are not quite in a position to tell you all of the details yet, but the solution is one that aims to preserve jobs, newspapers and websites.
The situation is broadly as follows:
- Johnston Press and its principal subsidiaries are to be placed into administration.
- Subject to the completion of several formal court approvals, the company’s businesses and assets will then be sold to a newly-incorporated group of companies controlled by the investors who own Johnston Press’ debt.
- Assuming this deal is approved, it will stabilise the business.
- Our operations will continue uninterrupted and so it is important that you turn up for work as normal – your employment contract will be transferring to the new company and you will continue to be paid as normal.
- The newspapers and websites will continue to be published as usual.
- Suppliers will be contacted in order to re-establish trading relationships.
- Customers will be contacted through the person who holds the relationship within the Company.
- The new business will have much lower debts. In addition, the new owners intend to provide new money to carry us forward.
- Unfortunately, the defined benefit pension scheme will not transfer. The Pension Protection Fund (PPF), a fund set up by the Government which provides pension benefits to members of defined benefit schemes whose sponsoring employers have become insolvent, will be notified. The PPF, with the assistance of the Trustees of the Scheme, will then assess whether the scheme needs to enter the PPF.
- Further details about the new business will be made available as soon as possible.
This has not been an easy decision for the Board. However, having explored a range of other options, this is the best available course of action and it is one that offers a chance for a brighter future for our business.
As I have stressed on several occasions, our business is profitable with good margins. Our debt has constrained us.
The FSP that we launched in October generated considerable interest. Our advisors contacted a wide universe of bidders and received additional unsolicited approaches.
There were offers for the whole group, as well as for some individual titles. Each approach was examined carefully. Yet none of these offers, or combinations of offers, would have raised enough money to repay the £220m debt that we are obliged to settle in June 2019, nor did they allow the defined benefit pension scheme to remain attached to the company.
Finding a solution for the defined benefit pension fund was problematic. Despite extensive discussions, it has not been possible to reach an agreement with the Trustees of the Pension Scheme, the Pensions Regulator and the PPF on the terms of a Regulated Apportionment Arrangement. This is an agreement that would have avoided some of our companies passing through administration.
Under the strict rules governing how companies must conduct themselves, the facts above lead the Board to the clear conclusion that the Group is Balance Sheet insolvent, which means it cannot repay the bond.
Given the circumstances outlined above and taking into account the interests of everyone involved with Johnston Press, I am convinced that what we are announcing today is the best solution available. Regrettably any shares you may have owned in Johnston Press plc will have no value – the company will be delisted from the London Stock Exchange as part of this process. This will happen on Monday.
Those of you who are members of the defined benefit pension scheme – which is 250 members of the current workforce – will see your future pension payments affected in line with PPF payment rules. I am deeply sorry about that, but we have explored in detail all other possibilities. The negative effects on the scheme are an inescapable consequence of taking the steps needed to ensure the future of the business. It will be up to the trustees of our pension fund to contact you to tell you what this means.
To repeat, as a Board, we have no doubt whatsoever that this is the best course of action remaining for everyone, as the alternative – which would be a lengthy and unpredictable administration process – would be much more disruptive to everyone inside the business, as well as our external stakeholders, and might have led to large numbers of redundancies.
I believe in this business, despite the tough trading environment in which we operate. Along with you and the rest of the senior management team, I will also transfer to the new business as chief executive. You can expect an announcement soon from the new company that will offer a little more detail which I hope will help you see why I retain some optimism.
A great deal of work has already been done to set up the business for the future. At its peak, the Company’s debt reached £793m. We have all worked incredibly hard to reduce those debts. And we have done so against a relentlessly tough market backdrop.
I want to thank you all again for the resilience, dedication and patience you have demonstrated through the Strategic Review process. It is thanks to you that we are able to map out our collective future, under this new ownership.
I also want to take this opportunity to address as many of the questions as possible that you have asked throughout this period. Today’s announcement makes it much easier for me to give you answers.
We all know that the last decade has seen the internet take readers and advertisers from local and national press titles, resulting in falling circulation and advertising revenues. We have had to constantly re-cut our cloth to match the new reality.
The debts that have weighed us down were accrued during an acquisitive period in the 2000s when local media companies were viewed as prized possessions. Johnston Press came close to joining the FTSE 100 at this time and was a top stock market performer praised by City analysts. The group’s debts were viewed as manageable, and the prices paid on those transactions were in line with the market at the time.
It was not obvious during this time of expansion that the newspaper industry was about to suffer the impacts we have since: The impact on classifieds of motor and property portals, the power of Google search, and latterly social media and new jobs portals. At the time Johnston Press bought The Scotsman in late 2006, Facebook was in a nascent stage.
We have faced the hard realities of our situation head on, with a calm-headed, rigorous, well advised, professional approach.
In March 2017, we began our methodical and exhaustive Strategic Review, which patiently explored a wide range of alternatives in great detail. We sought help from specialist advisers on each aspect of our problem.
One of the first options we explored to the fullest extent was a consensual debt-for-equity swap, a deal that would have required agreement from the bondholders, the shareholders and the Pensions Regulator. After extensive discussions, a deal could not be agreed.
As discussed above, we also examined a Regulated Apportionment Arrangement to mitigate the group’s pension situation. Again, this was not achievable.
Between June and September this year, the Board’s advisers made three separate approaches to potential lenders in different areas of the capital markets with the intention of refinancing to repay the bonds. None of these approaches yielded an adequate result.
The Board also kept in regular contact with its largest shareholders, beginning well before the FSP announced in October, to ascertain whether any of them would be prepared to participate in a restructuring or refinancing of the bonds. However, despite our attempts to engage, none of our shareholders has made any proposal to Johnston Press regarding the restructuring or refinancing of the bonds generally or submitted bids as part of the FSP.
Overall, although bids were received as part of the FSP, after careful examination with our advisors, the Board was forced to conclude that none of them would allow repayment of the bonds in total.
So, the outcome from the Strategic Review delivers the least possible disruption to the business, and the communities that Johnston Press titles serve.
If this deal is approved, the debt will be reduced, new money will be provided by the new owners, and the business will be in a more stable position.
We are very confident that this is not the end of the story, but the beginning of a new phase in which we work with the new owners of the group to give shape to a new future.
As the intended leader of the proposed new company I will be in touch again as soon as possible over this weekend to update you on the progress towards our goal of securing the future of the business for everyone.