Informa looks at cutting debt to below £1bn
Publisher could offload £200m training business as media sector warns banks of falling ad revenues
Sunday 21 December 2008
The board of Informa, the FTSE-250 media group, has ordered management to review its businesses as it looks to reduce its debt to less than £1bn. Selling parts of the group is the most likely option.
A source close to Informa said: "Institutions and the market have – incorrectly, in the company's view – marked Informa down as overgeared at three times Ebitda [a calculation of profit], and so the board has accepted that it will have to get below £1bn of debt. Divestments are one of the ways of solving that problem."
At its half-year results in July, net debt was £1.22bn, and, the source added, "a natural conclusion" was that the performance improvement division, which provides training, mainly in the US, could be sold. The division has an estimated enterprise value of up to $300m (£200m).
Taylor & Francis, the academic publisher, is highly unlikely to be let go, despite some market speculation, the source said. "Informa will look at non-core assets that could be sold off."
A board meeting earlier this month is thought to have decided that managers of the various divisions would be asked for "clarification" of their businesses and objectives.
Informa, which owns the shipping journal Lloyd's List and has a market capitalisation of over £1bn, hinted on Thursday at possible sales. In a trading statement, it said: "The board remains focused on the level of headroom against its bank covenants, which, as previously discussed, tighten next year.
"We remain comfortable with the current level of headroom, but continue to monitor both this and trading carefully and have a number of options available should circumstances change."
Informa, which is heavily indebted, partly because of its £500m purchase of Datamonitor in 2007, came close to losing its independence twice this year. Approaches in June from United Business Media, publisher of Building magazine and Property Week, failed to create a FTSE-100 giant to rival Reed Elsevier. And in September, Informa rejected a £1.9bn bid from a private equity consortium that included the US groups Blackstone and Carlyle.
Another media group that has worried its shareholders with its high level of debt is Mecom, the newspaper group run by former Trinity Mirror boss David Montgomery.
Mecom has a debt in excess of £540m, but is expected to issue a trading statement this week reasserting earlier claims that it is in no danger of breaking its loan terms. However, the group is expected to confirm that advertising revenue is falling.
Mecom and its adviser, NM Rothschild, are understood to be meeting with the group's banks to ensure they are forewarned that the media sector is in sharp decline. A close source said: "Banks need to understand what trading is like in the media business." Mecom, which owns 300 papers throughout Europe, fell out of the FTSE-250 earlier this month, along with fellow media groups Trinity Mirror and Johnston Press.
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