Sport Media Group, the publisher of the Daily and Sunday Sport, admitted yesterday it had breached a banking covenant as it continues to struggle in the deteriorating economic conditions.
The tabloid publisher's board was notified of the breach by its lending bank on Tuesday night. It is working to remedy the breach "through further discussions with the existing finance houses and is also exploring a number of alternative financing sources and structures".
Sport Media also revealed in a statement to the market yesterday that an "agreement has not been reached on revised facility terms". Negotiations are ongoing "and, in the interim, the bank has provided a two-month extension to the current facility". Sports Media believes it will be sufficient time to renegotiate terms.
Shares in the group plunged almost 40 per cent on the news, and despite rallying at the end of the day, is now more than 80 per cent lower than last January.
The news came on the eve it was to release its delayed results for the year to the end of July. It has been tough since Sport Newspapers was bought by Interactive World in a £50m reverse takeover in September 2007.
Barry McIlheney, the founder of Zoo Weekly and editor-in-chief of Sport Media, oversaw a £1m redesign in April in an attempt to take the paper upmarket. James Brown, the former editor of Loaded was brought in to consult.
The move has proved unsuccessful. The paper has shed readers and Mr McIlheney stepped down after just six months in charge. The company said in June: "The initial reaction to the relaunch has been disappointing, although the board remains confident that the revised style of the paper will attract new readers and advertisers."
The group also bought Front magazine and DVD World publisher Flip for £123,000 in June, but at the same time warned on profits for the second time in two months.
In November, the Daily Sport's circulation fell 1.64 per cent over the previous month to 77,964. The Sunday Sport fell 3.31 per cent at the same time to 76,009 according to the Audit Bureau of Circulations.
This is the latest bad news for the media sector, which is listing badly under the weight of the credit crunch. Advertising revenues have slumped, while the cost of newsprint is set to leap. This has led to publishing houses across the industry to cut jobs and look to sell off non-core assets.Reuse content