Johnston Press set to plunge into insolvency

THE newspaper publisher Johnston Press has confirmed it is ending its debt crisis by entering administration and handing control to its lenders, as revealed by The Telegraph. The embattled publisher of The

Scotsman, The Yorkshire Post and the i newspaper is applying for court approval to appoint administrators and execute a pre-packaged sale to a new holding company controlled by the New York hedge fund Goldentree Asset Management.

In a statement sent to employees, chief executive David King said the company’s new owners would “provide new money”.

Mr King said all employment contracts would be transferred to the holding company and staff would continue to be paid as normal.

He added that Johnston Press’s pension scheme would not transfer to the new company and said the government’s Pension Protection Fund would be notified.

The restructuring specialists Alixpartners will handle the administration, which is scheduled over the weekend to minimise disruption to Johnston Press and its portfolio of about 200 titles.

The complex legal procedure will involve English, Scottish and Northern Irish courts.

Goldentree is the dominant owner of £220m in bonds that are due for repayment in June. Amid brutal declines in local print advertising and the dominance of Google and Facebook online, Johnston Press is incapable of refinancing the debt, which costs about £20m a year in interest.

Last month Johnston Press launched a formal sale process in hope of attracting a rescuer after 18 months of talks with advisers. Its stock market value has collapsed to just £3.5m from a peak of £1.4bn before the credit crunch, but industry rivals were reluctant to take on the publisher’s debts, built up in an acquisition spree.

The company’s board was due to meet on Friday night to assess formally the bids as part of a strictly governed process before insolvency could be declared.

It was reported last weekend that DMGT the publisher of the Daily Mail, was considering a bid for the i, the only national title in the Johnston Press portfolio.

However, sources close to the crisis at the company dismissed the idea of a sale prior to an insolvency. The Pensions Regulator is closely monitoring Johnston Press and its £40m pension deficit, and has powers to block any asset sale that could disadvantage pensioners in an administration.

Under the terms of the Johnston Press bonds, the proceeds of a sale could be immediately drawn out of the company by lenders. Even at a valuation of £50m, more than twice what Johnston Press paid for the i in 2016, the publisher would not be able to reduce its debt by enough to avoid administration, sources said.

The new owner could seek to break up the Johnston Press portfolio once the insolvency process is completed, however. There have been multiple bids for parts of the company.

Goldentree built up its dominant position in the crisis by buying up Johnston Press bonds on the open market at a discount. Their value fell as the decline in the local newspaper business accelerated following the publisher’s last restructuring in 2014.