As 2008 draws to a close, one rather big problem is coming back to bite media companies: mounting debt. According to the Independent on Sunday, quoting unnamed sources, Datamonitor owner and Lloyd’s List publisher Informa is looking to sell off assets to pay off debts. In its interim results (pdf link) for the six months to 30 June the company had £1.219 billion of debt, compared to £720 million for the first half of 2007, mostly made up of a bank loan taken out to finance Informa’s Datamonitor purchase in 2007.
Last week Informa said in a trading update that “costs have been reduced and will continue to be reduced as appropriate” and that “the board remains focused on the level of headroom against its bank covenants which, as previously discussed, tighten next year.” Breaching those covenants is an unthinkable outcome for any plc, so the safe money would be on budget cuts or attempted divestments early next year. Though with the unsuccessful sale of Reed Elsevier’s RBI division looming large in the B2B sector, don’t expect a queue of a ready buyers or banks willing to finance any deals. More debt-watch after the jump…
– Virgin Media: And if you thought that was bad, Virgin Media (NSDQ: VMED) has £4.3 billion of debt
and was forced to plead with though it did manage to re-amend its debt payments to banks and put back the payment deadline for the bulk of it until June 2012, with some staged installments along the way — including a payment of £300 million last week. VMED has just paid out some serious capex on its 50mbps broadband project, but will save around £120 million through 2,200 full-time and temporary UK staff as part of a year-long restructuring programme. Updated.
– Johnston Press (£465 million): As of November JPR owed a bank-worrying £465 million, even after Malaysian media tycoon Usaha Tegas bought 20 percent of the company in July for £212 million, helping to alleviate £19 million of debt. But with banks expected to tighten their covenant rules in 2009, more action is needed to get into the black — so cue newsroom job cuts, office closures, mergers and overheads trimming across JPR’s 318 newspapers. Will newspaper companies be able to afford the digital investment they desperately need in 2009?
– Trinity Mirror (LSE: TNI) (£410 million): CEO Sly Bailey may remain confident that her company will continue to invest during the downturn, but its debt, standing at £410 million for the 17 weeks to October 26, will be a pressing concern. The company increased debt through a now canceled share buy-back programme, plus £54 million in pension payments and £45 million in net capex.
– Mecom (£600 million): The UK-listed European newspaper publisher, led by former Mirror Group chief executive David Montgomery, has approximately £600 million of debt and according to Guardian.co.uk risks breaching its covenants when they are tested on New Year’s Eve. Mecom, along with Trinity and Johnston, fell out of the FTSE 250 of top UK companies this month, a sign of the sorry state their finances are in.
UPDATE: Guardian.co.uk now reports that Mecom has been given two months to solves its debt situation and will not have to endure a test of its covenants on New Year’s Eve and now has until 28 February. Expect a concerted effort to some of the company’s assets between now and then.