View all newsletters
Sign up for our free email newsletters

Fighting for quality news media in the digital age.

  1. News
June 30, 2009

Bankers agree to look away as Johnston Press struggles with debt pile

By Peter Kirwan

As summer gets into its stride, the burdens weighing upon indebted media companies grow heavier.

Yesterday, Johnston Press announced the postponement of a test of its banking covenants from tomorrow until the end of August.

In plain language, this suggests that Johnston Press is no longer generating sufficient profit to keep its bankers happy — something the company predicted might happen as recently as mid-May.

The temporary solution involves JP’s bankers averting their gaze for the rest of the summer. Meanwhile, talks will continue about the company’s £450m debt pile, most of which needs to be re-financed between now and September 2010.

With dogged determination, finance director Stuart Paterson continues to insist that a ‘severe cyclical downturn'(rather than structural change or ill-advised borrowing) is to blame for the vast majority of the company’s woes.

Yet not much is going to change between now and the re-scheduled covenant test in late August — at least not in terms of underlying performance. Only recently Johnston Press suggested that analysts should revise their annual profit forecasts toward ‘the lower end of current market expectations”.

Content from our partners
MHP Group's 30 To Watch awards for young journalists open for entries
How PA Media is helping newspapers make the digital transition
Publishing on the open web is broken, how generative AI could help fix it

So change of a different kind must be on the cards. In the wake of Digital Britain, Johnston Press may finally succeed in offloading some of its assets. It would be surprising if the company wasn’t already engaged in talks about further industry consolidation.

But how much cash could Johnston Press raise by horse-trading the awkward bits of its portfolio where costs can’t be cut much further? The botched effort to sell its Irish newspapers is hardly reassuring.

Alternatively, the banks may re-finance the company’s loans on aggressive terms or swap some debt for equity. They may also insist that shareholders in Johnston Press share their pain.

This would be an unpleasant prospect for both the founding Johnston family (whose shareholding was diluted from 19.5% to 7.6% after JP’s rights issue last summer) and Tatparanandam Ananda Krishnan, the Malaysian tycoon who spent £80m buying into Johnston Press at significantly north of 100p s share last year. Today, the company’s shares are trading at 19.25p.

Johnston Press is currently telling the world is that negotiations are ‘constructive”.

It remains to be seen whether they stay that way. Solving Johnston Press’s debt dilemma will prove a lot more problematic than ongoing efforts to do the same at Independent News & Media.

Topics in this article :

Email pged@pressgazette.co.uk to point out mistakes, provide story tips or send in a letter for publication on our "Letters Page" blog

Select and enter your email address Weekly insight into the big strategic issues affecting the future of the news industry. Essential reading for media leaders every Thursday. Your morning brew of news about the world of news from Press Gazette and elsewhere in the media. Sent at around 10am UK time. Our weekly does of strategic insight about the future of news media aimed at US readers. A fortnightly update from the front-line of news and advertising. Aimed at marketers and those involved in the advertising industry.
  • Business owner/co-owner
  • CEO
  • COO
  • CFO
  • CTO
  • Chairperson
  • Non-Exec Director
  • Other C-Suite
  • Managing Director
  • President/Partner
  • Senior Executive/SVP or Corporate VP or equivalent
  • Director or equivalent
  • Group or Senior Manager
  • Head of Department/Function
  • Manager
  • Non-manager
  • Retired
  • Other
Visit our privacy Policy for more information about our services, how New Statesman Media Group may use, process and share your personal data, including information on your rights in respect of your personal data and how you can unsubscribe from future marketing communications.
Thank you

Thanks for subscribing.

Websites in our network