O'Brien vs. O'Reilly: Destroying the village in order to save it

As I suggested yesterday, the fat lady has yet to sing her song at Independent News & Media.

This morning’s print editon of the Irish Times carries speculation about a “revised proposal” that Denis O’Brien submitted to INM’s bondholders on Wednesday.

Most reports earlier this week treated the INM board’s vote in favour of the O’Reilly refinancing plan on Monday night as the end of the story.

It wasn’t: a 75% majority of bondholder votes is also required. Presumably, the bondholders are willing to give O’Brien another shot.

If this effort fails, O’Brien may try to buy out sufficient of the bondholders to block acceptance of the O’Reilly plan. Under these circumstances, examinership (administration) remains an option for INM. So, too, does the prospect of O’Brien buying the company from its administrators.

This saga, in other words, could still have a long way to run. In this context, O’Brien raised an important point yesterday. Speaking in Dublin, he argued that there is more to this struggle than the dynastic ambitions of two clans:

At a speaking engagement in Dublin yesterday, Mr O’Brien said the restructuring plan announced by the board of INM would make it a ‘zombie’company. Speaking to a group of UCD students at the Belfield campus, Mr O’Brien said INM was ‘an old-style company that has been run into the ground”.

O’Brien is hinting that the O’Reilly plan will result in a company with restricted room for manoeuvre. It’s not the first time he’s mentioned this prospect, either. Last week, O’Brien’s advisors argued that his original plan for INM would result in a company that is ‘better capitalised”.

You’d be foolish to take the hints of a buccaneer like O’Brien at face value. At Reuters on Wednesday, Neil Collins described O’Brien’s original plan as “so self-serving as to have no chance of success”. And yet O’Brien raises a valid point.

Too many reports remain fixated on the mechanics of deal-making. What really matters is whether INM, a company that publishes over 200 newspapers around the world, emerges from this crisis with the ability to shape its own destiny.

Johnston Press has already become a zombie company, a cash machine for the masters of the universe. Will INM now follow in its wake?

The warring parties could yet come to resemble the US marine commander who famously claimed that it was necessary to destroy a Vietnamese village in order to save it. All too often, this is the tragic outcome of debt refinancing overlaid with a struggle for equity control.

If INM isn’t already ‘an old-style company that has been run into the ground”, it stands an excellent chance of becoming one by the time its creditors and would-be masters have finished with it.

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