Johnston Press has moved to end uncertainty over its future by making deals with lenders who will give them control over newspaper publishers and title owners including The Scotsman, The Yorkshire Post and The i.
The company has agreed to a pre-packaged administration that, if approved in court, will see Johnston Press's business and assets sold to a new group of companies controlled by investors who have their debts. This includes Goldentree Asset Management, its biggest creditor with around £ 70m of bonds.
Johnston Press has been trying to stabilize its finances since March 2017, when it began negotiations to refinance the 220m pound bond due in June next year and begin a strategic review of its operations.
David King, chief executive, told staff in an email on Friday that the new plan would move the company to a healthier financial footing. "The solution is one that aims to maintain jobs, newspapers and websites," he said, adding that the company's operations would "continue to be published as usual".
Shareholders will be wiped out below the plan even though shares in the company have been sluggish for more than two years when it became clear that the debt problem could not be overcome. This company has a market value of only £ 2.9 million.
Johnston Press surrendered for sale on October 11, but the board said on Friday that "none of the offers the company had received provided sufficient value" which led to the conclusion "there is no value in the company's ordinary shares." This group attracted interest from potential buyers, with the Daily Mail and General Trust expressing interest in acquiring The i, but finally decided to maintain a portfolio of shared titles and files for administration.
Pre-packaged administration can be a controversial insolvency procedure because it allows companies to discard pension obligations and other claims. The Johnston Press pension fund, which has a deficit of £ 40 million, will not be transferred to the new owner based on an agreed plan. Instead, the company intends to notify the Pension Protection Fund, which was established by the British government to provide pension benefits to members of certain benefit schemes whose sponsors went bankrupt.
The PPF, together with Johnston Press pension fund trustees, will then assess whether the scheme is needed to enter PPF, the company said.
Mr King, who will remain the chief executive, said in his e-mail that finding a solution to the stipulated allowance scheme, which includes 250 employees, was "problematic", adding that "the negative effect on the scheme was the inevitable consequence of taking steps needed to ensure the future of the business ".
"After exploring various other choices, this is the best action available and it is one that offers an opportunity for a brighter future for our business," King added. "We are very confident that this is not the end of the story, but the beginning of a new phase where we work with the new owners of the group to shape the new future."
In the half year ended June 30, Johnston Press's total liabilities reached £ 252.6m, with a net profit of £ 3.7m on total revenues of £ 93m. Stock is now suspended and will be removed from the London Stock Exchange on Monday.