Break up speculation 'complete nonsense' says SMG

SMG, the Scottish media group which owns Virgin Radio and The Herald newspaper in Glasgow, denied weekend reports that its bankers had forced the company to break itself up.

The company, which has postponed annual results previously scheduled for release this week, is under pressure over its burgeoning debts, but said talk that it would launch a big programme of disposals was "complete nonsense".

The collapse in advertising revenues, which has particularly affected Virgin and SMG's two Scottish ITV franchises, is believed to have left the group in breach of its banking covenants. It is understood to be talking to its bankers, including Clydesdale and Barclays, over a refinancing.

It is likely to mean SMG, which is chaired by Don Cruickshank, will have to accept higher interest rates in future and incur a one-off renegotiation fee of about £2m. Deloitte & Touche, the accountancy firm hired by SMG to conduct an internal review, has now completed its work.

SMG's media interests span billboard and cinema advertising, newspaper publishing, radio and television. The collapse in media company valuations, which has seen SMG shares fall more than 60 per cent from their peak, has put a brake on the chief executive Andrew Flanagan's ambitions to grow a British media conglomerate from his Glasgow headquarters.

Last night SMG insisted the postponement of the results was due to a timetabling clash with results from Aegis, the advertising group.

There was speculation over the weekend that SMG's troubles have left it as a takeover target for Capital Radio, but the radio group said it was unlikely to bid because of prohibitive media ownership regulations.