ITV to raise £120m bond issue and keep SDN
ITV has announced plans to raise £120 million through a bond issue and keep its digital television business SDN.
The broadcaster said holding on to SDN, which operates the Freeview multiplex that hosts a number of channels including Five and QVC – will offer “greater potential value for shareholders”.
In February, ITV said it was considering off-loading SDN to save cash and focus on its core broadcast and television production business.
However, it a statement released today, ITV said SDN will be used to provide asset backing to ITV’s pension scheme, which will reduce the need to cuts its pension deficit. The broadcaster also confirmed plans to use a £120 million bond to help strengthen its balance sheet.
John Cresswell, ITV’s chief operating officer and stand-in chief executive, said: “The actions that we are announcing today continue our work over recent months to strengthen the balance sheet, improve our debt maturity profile and proactively manage our pension deficit over the long term.
“With the proceeds of the convertible offering, to date this year we will have raised over £225 million of new borrowing with maturities ranging from 2015 to 2019 and without financial covenants.
“Seeking to deploy SDN as asset backing to the pension scheme will help us manage our pension risk, while continuing to benefit from the strong cashflows that business delivers. We believe it is the right decision for ITV, maximising value for shareholders.
“Whilst we are not yet seeing a recovery in UK television advertising, the trend is improving across the second half and into the fourth quarter. We continue to outperform the market and are on track to deliver the substantial cost savings we have set out.”
SDN’s revenue is forecast to exceed £40 million this year. If ITV would have gone ahead with the plans to sell the business, it would have made around £200 million, according to estimates.
The broadcaster’s statement comes just a day after it was forced to announce that Sir Michael Bishop and Sir Crispin Davis have both ruled themselves out of the running to become the broadcaster’s new chairman.
As such, John Cresswell will take over as chief executive to help the company find and appoint a new chair. Cresswell will then step down altogether to “seek a fresh challenge”, the broadcaster said yesterday.
Losing two more potential candidates comes as a further blow to ITV after its hopes to appoint the former BSkyB chief Tony Ball fell through due to “substantial differences” of opinion.
However, ITV said it “is continuing its search with all due speed”.
ITV’s shares were up 4.5% in early trading today, to 49.5p.