Independent News & Media Regulatory News (INM)

AGREEMENT REACHED ON FINANCIAL RESTRUCTURING

Ticker: (Bloomberg) INM.ID/INM.LN and (Reuters) INME.I/INME.L

Dublin/London 26 April 2013: Independent News & Media PLC ('INM' and/or the 'Company' and/or the 'Group') announces that it has agreed terms of a restructuring of its debt facilities ('Restructuring') and has entered into a formal agreement with its syndicate of eight lenders ('Lenders') under which INM and its Lenders agree to support and implement the Restructuring (the 'Restructuring Agreement'). Standstill arrangements are provided under the Restructuring Agreement so as to provide the Company with stability during the period of implementation. This Restructuring follows the Group's announcement on 5 April 2013 that it had entered into a binding agreement ('Sale Agreement') with Sekunjalo Independent Media Consortium ('Sekunjalo'), in respect of the disposal of Independent News & Media South Africa ('INMSA') ('Disposal') for a gross consideration of R2 billion (approximately €167m*) before expenses.

The Restructuring has been designed to reduce the debt of the Group to a core debt of €118m and €8m of other facilities and credit lines and to substantially reduce the Group's obligations arising from the deficit under the Group's ROI Pension Schemes[1]. It is proposed to implement the Restructuring in stages (graphically set out in Appendix 1): http://www.rns-pdf.londonstockexchange.com/rns/2940D_-2013-4-25.pdf 

Stage 1: Sale of INMSA, debt pay-down and interim restructuring of debt to substantially reduce the burden of the existing debt levels on the Group;

Stage 2: A restructuring of the Group's ROI Pension Schemes, in conjunction with the Trustees of the schemes, to reduce their deficit and provide greater certainty on future pension-related funding; and

Stage 3: New equity to be raised to enable €40m of debt to be repaid, which will allow core debt levels to be reduced further to €118m with €8m of other facilities and credit lines.

On the successful completion of all stages (as outlined above), the Restructuring will:

·; Reduce the Group's core debt to €118m, with €8m of other facilities and credit lines;

·; Achieve the Group's stated strategic leverage target of a Net Debt to EBITDA ratio of approximately 3 times;

·; Extend the maturity of the Group's debt for five years to 1 April 2018;

·; Secure an appropriate and stable capital structure and debt amortisation profile for the Group; and

·; Provide the Group with the requisite funding to:

o Continue to invest in the digital arena and to invest in its core print titles; and

o Enable the Group to deliver further and necessary cost reductions, building on 2012 initiatives and targeting a full year benefit of c.€26m.

Commenting on the Restructuring, Vincent Crowley, CEO stated:

"This announcement is a very positive development for the Company and is a pragmatic and constructive outcome for all stakeholders. Assuming all stages of the Restructuring are implemented in full, it puts the Group on a secure financial footing, with a sustainable debt level and an ability to implement a restructuring of the business. It will also facilitate the repositioning of the Group to embrace opportunities in the digital arena, while continuing to invest in our core print titles.

"The Restructuring is complex and multi-layered. However, on completion of all stages, it is a balanced outcome where all stakeholders have an interest in a Group which is financially well positioned to deal with the challenges and opportunities arising in the media space.

"I would like to thank the management team and all the staff of the Group for their hard work and forbearance to date, in what has been an uncertain and challenging time for all concerned."

Implementation of the Restructuring is subject to completion of a number of sequential steps, including a restructuring of the Group's ROI Pension Schemes and the raising of additional funds by 31 December 2013, to enable €40m of debt to be repaid (the 'New Equity Issue'). The New Equity Issue is intended to be implemented by way of a rights issue, offering shareholders a pro-rata opportunity to participate. Assuming all of the steps, including the New Equity Issue, are completed, the end result of the Restructuring will result in core debt of €118m (plus €8m of other facilities and credit lines), with a five year term, maturing on 1 April 2018. This is in line with the Company's stated objective of a ratio of Net Debt to EBITDA of approximately 3 times. The Restructuring also addresses and accommodates the position where such a New Equity Issue is not implemented.

If successfully implemented, the Board of INM believes that the Restructuring will provide the Group with financial stability. It will give the Group a firm platform to implement its business plan (including identified cost reductions) and strategic repositioning by diversifying revenues further and embracing opportunities in the digital space, whilst maintaining a strong focus on its profitable print titles. A key component of the business plan is the completion of a fundamental restructuring of the Group, which is targeted to result in annualised savings of c.€26m on a full year basis.

Key features of the Restructuring

The Restructuring will be implemented in several stages, the last of which is required to be completed by 31 December 2013. The stages are as follows:

·; The Restructuring Agreement includes a standstill period, providing time for implementation of the Restructuring. During the standstill period, the Lenders may not take action to enforce any claim for payment against the Group including any payment of principal. Interest continues to accrue on the Group's Bank Facilities for the duration of the standstill, but is payable by reference to a notional €150m principal amount of term debt (i.e. in effect as if the proceeds of the Disposal had been applied in repayment of the Group's existing Bank Facilities and the remaining debt had been reorganised as contemplated by the Restructuring). The standstill and other terms of the Restructuring Agreement will run until the implementation of the First Stage Debt Restructuring (see next bullet point), when it is intended that the Restructuring Agreement will be superseded by an amended facility and equitisation agreement documenting the revised debt and equity arrangements. The Restructuring Agreement, and standstill, is terminable in a range of circumstances including in the event of a material adverse change in the business of the Group or in the event of the failure of the Group to implement the first stage of the Restructuring (i.e. the Disposal and application of the net proceeds to repay debt).

·; Under the first stage of the debt Restructuring, the proceeds of the Disposal, after allowing for expenses and an amount of €10m being placed in escrow** in respect of any future warranty claims arising from the sale of INMSA, will be applied to repay a matching amount of debt (currently anticipated to be approximately €148m). Following this repayment, the existing debt facilities will be re-organised into four facilities, with a three year term, maturing on 1 April 2016: Facility A (€150m); Facility B (€50m); Facility C (expected to be approximately €116m) and additional facilities and credit lines (approximately €8m), totalling approximately €324m ('First Stage Debt Restructuring').

·; Following the First Stage Debt Restructuring, it is proposed that a restructuring of the Group's ROI Pension Schemes, within parameters agreed with the Lenders (the 'Pension Restructuring') will be implemented, with the agreement of the Trustees of each of the pension schemes. As at 31 December 2012, the total deficit in respect of these schemes was €162m. The Pension Restructuring will entail a submission being made, in compliance with Section 50 of the Pensions Act 1990, by the scheme Trustees to the Irish Pensions Board.

·; Subsequent to approval of the Pension Restructuring by the Irish Pensions Board, the Company may seek, as part of the Final Stage Debt Restructuring, to implement the New Equity Issue. It is intended that any such equity issue will be by way of a rights issue, offering shareholders a pro-rata opportunity to participate. It has also been agreed that, as part of any such capital raising (the possible capital raise by the Company to raise in aggregate at least €40m (net of expenses) as part of the Final Stage Debt Restructuring), the Lenders would be issued with Ordinary Shares representing €10m in value, subject to a minimum of 11% of the enlarged issued share capital of the Company ('Lender Shares' or 'Rights Issue Equitisation').

The Restructuring Agreement provides that, on the application of €40m of the proceeds of any New Equity Issue to repay bank debt and the issue of the aforementioned Lender Shares, the Group would see a reduction in Facility A and the cancellation of Facilities B and C (save in respect of €10m representing the amount of INMSA Disposal proceeds to be held in escrow, pursuant to the Sale Agreement in respect of potential warranty claims by the purchaser**), resulting in total Group core debt of €118m (plus other facilities and credit lines of €8m), (excluding €10m held in escrow**). These facilities would then have a five year term, maturing on 1 April 2018.

The resulting capital structure, post the Final Stage Debt Restructuring, is the preferred outcome for the Group as it will deliver a resilient and stable capital structure.

·; Under the terms of the Restructuring, in the event that the Company does not proceed with the New Equity Issue by 31 December 2013 but the Pension Restructuring has received the Irish Pensions Board's approval, the Company would be required to issue Ordinary Shares to the Lenders representing in aggregate 70% of the enlarged issued share capital ('Equitisation') and Facility C only would be cancelled (save in respect of €10m, representing the amount of INMSA disposal proceeds held in escrow**). In this situation the debt facilities available to the Group would total approximately €208m (€200m core debt plus other facilities and credit lines of €8m), with a further €10m relating to funds held in escrow (as referred to above). These facilities would have a three year term, maturing on 1 April 2016.

·; In the event that neither the New Equity Issue proceeds nor the conditions to the issue of equity to the Lenders are satisfied (including the implementation of the Pension Restructuring), the facilities will remain at the levels in effect following the First Stage Debt Restructuring (approximately €314m, plus €10m escrow related debt**) and the maturity date on these facilities would also be for three years, maturing on 1 April 2016.

Implementation of the Restructuring is subject to a number of conditions, including shareholder approval, and a number of sequential steps to implementation. An extraordinary general meeting of shareholders will be convened in June to seek the requisite approvals for the sale of INMSA and to enable subsequent implementation of the other elements of the Restructuring.

Further Information

Further information in relation to the Restructuring will be contained in a circular to shareholders convening an extraordinary general meeting at which all of the resolutions necessary for the implementation of the Disposal and the Restructuring will be sought.

Notes:

* Using an exchange rate of €1:ZAR12.

** The €10m of the net proceeds of the Disposal which will be placed in escrow in respect of any potential warranty claims by the purchaser on INMSA will, following the release from escrow after a two year period, be used to repay the €10m debt referred to. Should the escrow amount released be insufficient to repay the debt, the balance will be cancelled.

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