Debt-for-equity plan would result in no clear winner

MEDIA reports may eventually paint Denis O’Brien as the main “loser” from Independent News & Media’s proposed debt- for-equity restructuring plan, should it formally go through in the coming weeks.

However, in reality, it could easily be argued that there are no clearly identifiable winners either, no matter how much we’re led to believe that a successful restructuring would mean a moral victory for the O’Reilly family and an illustration of INM chief executive Gavin O’Reilly’s negotiating skills.

In reality both sides will have lost close to €1 billion on their investment in INM and with that score line there can be no winners, only losers.

For Mr O’Brien, this deal would see his 26% shareholding in the group lessen to around 13%. And his bid to stop the sale of INM’s South African outdoor advertising business and force the disposal of its London-based newspapers will have failed. It would also spell failure for his own rival proposal to bondholders, tabled last week, which would have ultimately seen him gain a majority shareholding in the group.

For the O’Reilly’s, while it means they will effectively retain control of the business and Tony O’Reilly is likely to remain its largest individual shareholder, they, too, are diluting their share and entering a likely debt-for-equity swap deal — something which was never previously their preferred choice of recovery route — and in the process, running a real risk of damaging confidence further among long-term investors.

And then there are the bondholders, who instead of being repaid the €200m owed to them back in May will get around €94m and, in lieu of the rest, a 47% stake in a company which has seen its share value plummet by more than 80% in the last year.

Initial market reaction to the proposed restructuring agreement, which was announced late on Monday night, has been cool, to say the least. INM’s share price was down by nearly 13%, or 4c, to 24c in Dublin yesterday. This time last year the stock was trading at just over €1.20 per share.

One Dublin-based analyst said it was too early to know for sure if INM’s proposed deal would succeed, as much might depend on the reaction from Mr O’Brien, who was conspicuous by his silence yesterday.

The general feeling, however, seems to be that this is not a great deal for anyone but that it will probably have to be passed to keep the business intact and to help reduce its €1.3bn, or so, in overall debt. However, it is felt the situation still has a bit to run before a conclusion is reached. And analyst sentiment that it would have been better had the bond been repaid in full in cash is likely to be echoed by many involved.


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