INM agrees on O’Reilly’s rescue plan

Independent News & Media has reached an agreement to reduce its debt by €350 million in deal that will see Sir Anthony O’Reilly give up half of his stake.

The INM board agreement, which will also see rebel shareholder Denis O’Brien’s lose half his stake, involves a debt-for-equity swap, a rights issue and raising funds through selling-off assets.

The ailing company plans to exchange €123 million of outstanding bonds for 723.2 million new ordinary shares, which represent 46% of the issues share capital.

INM is also launching a rights issue worth up to €94 million.  The plan will mean existing shareholders will be able to retain approximately 52% equity interest.

However, as a result, O’Reilly’s 28% stake will drop to 14.82%, while O’Brien’s 26% stake will be reduced to 13.5%.

INM’s syndicate of banks have also agreed to the sale of the company’s South African ad business, INM Outdoor, which is expected to make around €150 million.

The board sided with O’Reilly’s proposal, saying the restructuring plan offered a “superior outcome” with “materially less execution risk compared to any other proposal received”.

Last week, O’Brien tried to persuade the board and INM’s banks to consider an alternative rescue plan, which would have seen him invest €100 million of his own money into the company in return for a 67% controlling stake.

His restructuring plan would have seen bondholders receive some cash immediately and swap the remainder of their loans for equity in the company, and would have meant there would be no need for a rights issue.

It also would have made the positions of chief executive Gaving O’Reilly and chairman Brian Hillery untenable, and would have involved keeping INM Outdoor and selling off the Independent and Independent on Sunday titles.

However, the board decided against O’Brien’s alternative proposals and instead favoured the largest shareholder O’Reilly’s suggestion.

“This restructuring will provide the INM Group with a €350m reduction in net debt in 2009 … and a stabilised financial position,” said Gavin O’Reilly, chief executive of INM. “We now expect that all parties will move towards implementation of the restructuring without delay, including procuring necessary consents and approvals.”