Mecom offloads titles in Norway as it fights debt battle
Thursday 19 February 2009
The troubled British-based newspaper publisher Mecom has agreed to sell several Norwegian titles as it fights to raise cash and survive the economic downturn. The company sold newspapers including Norway’s Sunnmorsposten and Romsdals Budstikke dailies to rival Polaris Media for a total value of about £55.9m including debt assumed by the buyer.
Mecom also sold other north-western Norwegian publications, including seven wholly owned local newspapers and stakes in three partly owned titles as part of the deal. It had only bought the assets sold in 2006, but the downturn is forcing the company to reverse its recent expansion in an attempt to curb the debt that fuelled it at the time but now threatens to drown the company.
The London-based newspaper publisher said the sale would produce net cash proceeds of about £54.4 m, adding that the cash raised by the sale will be used to strengthen its balance sheet by paying off debt.
The company’s high amount of debt has investors so worried its stock price has tumbled from more than 24 pence in October to just over 3p yesterday. It had already sold its German newspapers last month as it sets itself up to try to get through its next covenant test with lenders at the end of this month.
Newspaper publishers are being hammered by the downturn, as the advertisers on which they rely for profitability hold on to their cash.
Mecom will still be left with operations in Norway, the Netherlands, Denmark and Poland.
“The Board is confident that the continued strategy of reducing debt and focusing on our core assets greatly improves the position and prospects of the Group,” said the company’s chief executive David Montgomery.
News of the sale buoyed investor sentiment in the company, prompting a rise in its share price of more than 22 per cent.
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