The owner of the Daily Sport and Front magazine has been given two months by its bank to reorganise its finances after it breached one of its lending agreements.
Sport Media Group said in a statement to the City this morning that it was in discussions with its lenders and exploring “alternative financing sources”.
The Manchester-based publisher, formed in 2007 when digital content firm Interactive World bought Sport Newspapers, said it was informed by its bank last night that it was in breach of one of its covenants – the agreements governing how much a company can borrow in relation to its earnings.
The publisher said it had not yet reached an agreement with the bank on a new set of terms.
Shares in Sport Media Group fell by more than a quarter this morning – down 28 per cent at 10am to 6.5p.
The group said: “Revised facility terms continue to be negotiated and, in the interim, the bank has provided a two-month extension to the current facility.
“The company is seeking to remedy the breach through further discussions with the existing finance providers and is also exploring a number of alternative financing sources and structures.
“The board believes that a refinancing solution will be reached within the extension period and will continue to update the market with regards to future developments as and when they occur.”
Sport Media Group is expected to publish its end-of-year results tomorrow morning.
The results – covering the 12 months to the end of July 2008 – were due to be released in November but were delayed. A further update on trading since then is also expected tomorrow.
Last summer, Sport Media Group said it expected pre-tax profits to the end of July to exceed £6m and said it was optimistic for the coming year.
SMG’s net debt at the end of January 2008 was £8m. Since then, the group has spent £265,000 on the acquisition of Flip Media, publisher of monthly men’s magazine Front.
This morning’s 6.5p share price gives Sport Media Group a market valuation of £6.3m.
This time last year, shares in the company were trading at 53.5p – a year-on-year fall of about 85 per cent.