Highbury House, the heavily indebted magazine publisher run by former Sun editor Kelvin MacKenzie, rebuffed an approach by a rival interested in buying its titles last week.
The approach, led by a former executive of Highbury House who wished to remain anonymous, was made to the board. It followed the suspension of the publisher's shares last week while Mr MacKenzie holds emergency talks with its banks.
He is understood to be trying to arrange new financing to keep the group, which publishes lads' mag Front, afloat. This is even though, in the announcement to the stock market suspending its shares, the company said talks with its banks to swap some of their £30m debt for shares had been terminated.
If Mr MacKenzie cannot arrange new financing - or secure agreement to restructure the existing debt - then administration is likely unless it can sell all or some of its titles. The company did not return calls from The Independent on Sunday.
Other magazine publishers and private equity groups are watching in case its assets become available. These are thought to include Centaur, which publishes The Lawyer, and IPC Media, publisher of Marie Claire and Loaded. No formal approaches for its titles are thought to have been made.
Highbury House has admitted breaching its borrowing covenants with its banks, which means they can recall their £30m of loans, so pushing it into administration. The equity value of the group is £2.2m. Shareholders are behind the banks in the queue of creditors in the event of administration.
But even the banks are unlikely to recoup more than half their money if the group is sold. Its titles showed an operating profit of just £597,000 in the first half of the year, although the group usually makes most of its money in the second half.
Mr MacKenzie installed himself as executive chairman in September after buying 20 per cent of the company. He made an estimated £7m after selling his stake in The Wireless Group.
Iain Daly, analyst at house broker Bridgewell, said: "Previous management has left a financial legacy from an over-aggressive and overpaid expansion policy."Reuse content