Scottish giant Johnston Press close to refinancing £500m debt

Lloyds and RBS would be performing 'a highly political act' if they pulled the plug on publisher
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The Independent Online

Bankers to Johnston Press are optimistic that refinancing the newspaper publisher's £500m of debt should be finalised over the next few days.

One adviser said on Friday: "These negotiations are always done at the 11th hour and this is no different. But we are hopeful that agreement will be reached with the syndicate by the end of August." NM Rothschild and Cazenove are advising the group during its negotiations to extend the facilities beyond September 2010.

The adviser added: "Royal Bank of Scotland and Lloyds, both owned by the taxpayer, are big lenders to Johnston so it would be a highly political act if they decided to pull the plug on such a big group employing so many people, particularly in Scotland."

Johnston, which publishes The Scotsman as well as 200 or so local newspaper titles, was close to breaking its debt covenants earlier this year following the collapse of the sale of its Irish titles and asked for banking facilities to be extended beyond September 2010.

Its chief executive, John Fry, will update the market on the refinancing on Friday when he reports half-year figures for Scotland's biggest newspaper-to-online group, which has suffered badly from the downturn in advertising. Speculation that Johnston would be looking to raise up to £200m through a two for one open offer placing at 15p a share was denied by company advisers. Johnston, which was once worth more than a £1bn but is now valued at only £180m, saw its shares add 1p to close at 31p on Friday.

Other FTSE 100 companies reporting this week, in one of the busiest corporate weeks for months, include Diageo, Bunzl, Admiral, Serco, WPP Group, Cairn Energy and Kazakhmys. Drinks group Diageo, best known for its Guinness and Moet Hennessy brands, reports full-year results on Thursday which are expected to show a small downturn in organic sales growth. Brokers Charles Stanley forecast Diageo will report an increase in profit before tax to £2.3bn but that sales year on year will be 0.3 per cent lower, although it is likely to out perform its competitors. Shares have already shot ahead by 12 per cent over the last few months and most analysts are switching out of a buy to a neutral.

Investors will be looking for news from housebuilders Bovis and Persimmon for further clues to the state of the housing market as well as their own balance sheets. Shares in Persimmon have recovered sharply over the last few months, shooting up to close last week at 501p as investors look for recovery in the sector.