Mecom has asked its shareholders for an extra £141.5m in cash to give the European newspaper group “a new lease of life”.
The company announced this morning that it was offering each Mecom shareholder an additional six shares at a discounted price of 1.5p each – 70 per cent cheaper than yesterday’s 5p closing price.
Mecom said the money raised from the extra 9.4 billion shares would be used to reduce debt levels and “deliver stability” to the company’s finances.
Chief executive David Montgomery said: “The refinancing helps provide a new lease of life for the newspaper business.
“This depends on our ability to implement a new operating model and abandon the traditional working practices of the industry, focusing instead on the commercial exploitation of content across all platforms.
“Mecom intends to complete this modernisation process within one year leaving the company fit to take advantage of the upturn in the economy.”
Investment bank JP Morgan has agreed to underwrite the share issue – meaning it will buy any unwanted shares.
Mecom also announced today that it had reached a deal with its lending banks to postpone two covenant tests that were due at the end of next month and the end of December.
The “holiday” means Mecom has until June 2010 before its lenders assess whether the company’s financial position is within the agreed limits.