Independent cuts debt with €103m rights issue

Independent News & Media, the parent company of The Independent and The Independent on Sunday, yesterday announced plans to strengthen its balance sheet through a €103m (£70m) rights issue and the sale for €88m of its British regional newspaper business.

The group is selling its 45 local newspapers, which are mainly London based, to Newsquest, part of the US newspaper giant Gannett, after an offer it described as "too good to refuse".

A further €103m is being raised through a four for 15 rights issue at 70 cents a share. Together with the €65m received in November last year from the disposal of convertible notes in APN, the group's Australian offshoot, the combined effect will be to raise €256m of new funding to help with future development.

Ivan Fallon, the chief executive of Independent News & Media (UK), said the fundraising was part of an ongoing programme of debt reduction after heavy spending on expansion in recent years. The effect would be to return the group to investment grade, enabling it to refinance at lower cost. Mr Fallon said the regional titles, although profitable, had reached something of a dead end in a consolidating market and it therefore made sense to take advantage of Gannett's "premium offer".

The group remained wholly committed to its two national titles in Britain, which were flagship products for the group and "central to what we are trying to achieve as a company".

The two titles are a core source of quality editorial for the company's newspapers around the world. For instance, The Independent's recent supplement on the war in Iraq was reproduced in titles as far flung as Dublin and New Zealand, South Africa and Australia.

Mr Fallon said that the outlook for The Independent and its Sunday stablemate was better than it had been for a long time, with a rising share of circulation and advertising in the British broadsheet market.

The rights issue accompanied annual results which showed continued progress in local currency terms across all the group's operations. The southern hemisphere, unaffected by war against Iraq, remained particularly strong.

Sir Anthony O'Reilly, the executive chairman of Independent News & Media, said the various capital raising initiatives would provide "a greatly fortified capital structure" for the group, which expects to show "a meaningful improvement for 2003". Sir Anthony has pledged to take up his full entitlement in the rights issue in respect of his 26.7 per cent holding in the company.

Group operating profits for last year before exceptional items rose from €219.9m to €223.2m. The company is taking an asset impairment charge of €82.5m on its 50 per cent interest in the Irish cable operator Chorus. In common with other cable operators, the assets are being written down to nothing.