Q&A: Independent News & Media's debt problem

Why the renegotiation of this bond deal is so critical to Independent News & Media – and what is likely to happen next
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Why is Independent News & Media so desperate to renegotiate its debt?
Like many companies, The Independent owner has debts to repay, the most pressing of which is a long-standing €200m (£179m) bond that must be refunded by 19 May. However, the company doesn't have the money to pay back and, crucially, it must file its 2008 results by tomorrow at the latest. If it has not reached an agreement with the bondholders by then, the auditors who sign off its year-end accounts may warn that it is no longer trading as a "going concern", effectively telling investors there is a chance INM could go bust. It has already postponed its 2008 results announcement twice to give it more time to hammer out a debt rollover deal.

Why can't it delay its results again until a deal is done?
The company is listed in Dublin, and under Irish Stock Exchange rules, companies must file their results no later than four months after the end of the financial year. So tomorrow, 30 April, is the last day it can do so. If it was to miss this deadline the company's shares would be suspended, according to an Irish Stock Exchange official.

What are the possible solutions?
Paying off some of the €200m debt now – say €70m – might reassure bondholders that their money is safe, and persuade them to refinance the remaining €130m balance over a longer period. Tony O'Reilly and Denis O'Brien, INM's two largest shareholders, are believed to be prepared to use their own money to make that initial payment, but bondholders might hold out for more cash. The company would also have to pay more interest on the new, restructured bond arrangement as its finances are in a more parlous state than they were when the first bond was negotiated.

And what is the likely outcome?
Bondholders have little to gain by allowing the company to slide further into financial trouble since it will not increase their chances of getting their money back. So a compromise solution seems likely. If INM can conclude agreements to sell some key assets, including its valuable outdoor advertising business, before its reports its results on Thursday, that will bring an agreement closer. The money raised would be more than enough to pay off the outstanding debt.

Will the asset sale include the Independent and Independent on Sunday?
Not if INM can help it. Executives would have to take any offer for the loss-making paper seriously, but there are few credible buyers and the number who would pay a sizeable sum are fewer still. The company would probably have to accept a nominal bid of £1, which would not solve its short-term debt problem. INM would rather try to stem the London-based papers' losses via the office-sharing arrangement with Daily Mail & General Trust. The Indie titles move in to DMGT's offices in a few weeks, and will share resources with the Daily Mail and, possibly, the London Evening Standard, which is also still based in Derry Street despite being bought by Alexander Lebedev at the start of the year.



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