I said I would update you with any news around the Formal Sale Process (FSP) and future of Johnston Press. I am aware that it’s your weekend, but I am now in a position to tell you more.
As you know, the board of directors has been undertaking a Strategic Review for some time, in order to find a way to deal with our historical debt and pension obligations.
That process is reaching a conclusion this weekend. We are not quite in a position to tell you all of the details yet, but the solution is one that aims to preserve jobs, newspapers and websites.
The situation is broadly as follows:
This has not been an easy decision for the Board. However, having explored a range of other options, this is the best available course of action and it is one that offers a chance for a brighter future for our business.
As I have stressed on several occasions, our business is profitable with good margins. Our debt has constrained us.
The FSP that we launched in October generated considerable interest. Our advisors contacted a wide universe of bidders and received additional unsolicited approaches.
There were offers for the whole group, as well as for some individual titles. Each approach was examined carefully. Yet none of these offers, or combinations of offers, would have raised enough money to repay the £220m debt that we are obliged to settle in June 2019, nor did they allow the defined benefit pension scheme to remain attached to the company.
Finding a solution for the defined benefit pension fund was problematic. Despite extensive discussions, it has not been possible to reach an agreement with the Trustees of the Pension Scheme, the Pensions Regulator and the PPF on the terms of a Regulated Apportionment Arrangement. This is an agreement that would have avoided some of our companies passing through administration.
Under the strict rules governing how companies must conduct themselves, the facts above lead the Board to the clear conclusion that the Group is Balance Sheet insolvent, which means it cannot repay the bond.
Given the circumstances outlined above and taking into account the interests of everyone involved with Johnston Press, I am convinced that what we are announcing today is the best solution available. Regrettably any shares you may have owned in Johnston Press plc will have no value – the company will be delisted from the London Stock Exchange as part of this process. This will happen on Monday.
Those of you who are members of the defined benefit pension scheme – which is 250 members of the current workforce – will see your future pension payments affected in line with PPF payment rules. I am deeply sorry about that, but we have explored in detail all other possibilities. The negative effects on the scheme are an inescapable consequence of taking the steps needed to ensure the future of the business. It will be up to the trustees of our pension fund to contact you to tell you what this means.
To repeat, as a Board, we have no doubt whatsoever that this is the best course of action remaining for everyone, as the alternative - which would be a lengthy and unpredictable administration process - would be much more disruptive to everyone inside the business, as well as our external stakeholders, and might have led to large numbers of redundancies.
I believe in this business, despite the tough trading environment in which we operate. Along with you and the rest of the senior management team, I will also transfer to the new business as chief executive. You can expect an announcement soon from the new company that will offer a little more detail which I hope will help you see why I retain some optimism.
A great deal of work has already been done to set up the business for the future. At its peak, the Company’s debt reached £793m. We have all worked incredibly hard to reduce those debts. And we have done so against a relentlessly tough market backdrop.
I want to thank you all again for the resilience, dedication and patience you have demonstrated through the Strategic Review process. It is thanks to you that we are able to map out our collective future, under this new ownership.
I also want to take this opportunity to address as many of the questions as possible that you have asked throughout this period. Today’s announcement makes it much easier for me to give you answers.
We all know that the last decade has seen the internet take readers and advertisers from local and national press titles, resulting in falling circulation and advertising revenues. We have had to constantly re-cut our cloth to match the new reality.
The debts that have weighed us down were accrued during an acquisitive period in the 2000s when local media companies were viewed as prized possessions. Johnston Press came close to joining the FTSE 100 at this time and was a top stock market performer praised by City analysts. The group’s debts were viewed as manageable, and the prices paid on those transactions were in line with the market at the time.
It was not obvious during this time of expansion that the newspaper industry was about to suffer the impacts we have since: The impact on classifieds of motor and property portals, the power of Google search, and latterly social media and new jobs portals. At the time Johnston Press bought The Scotsman in late 2006, Facebook was in a nascent stage.
We have faced the hard realities of our situation head on, with a calm-headed, rigorous, well advised, professional approach.
In March 2017, we began our methodical and exhaustive Strategic Review, which patiently explored a wide range of alternatives in great detail. We sought help from specialist advisers on each aspect of our problem.
One of the first options we explored to the fullest extent was a consensual debt-for-equity swap, a deal that would have required agreement from the bondholders, the shareholders and the Pensions Regulator. After extensive discussions, a deal could not be agreed.
As discussed above, we also examined a Regulated Apportionment Arrangement to mitigate the group’s pension situation. Again, this was not achievable.
Between June and September this year, the Board’s advisers made three separate approaches to potential lenders in different areas of the capital markets with the intention of refinancing to repay the bonds. None of these approaches yielded an adequate result.
The Board also kept in regular contact with its largest shareholders, beginning well before the FSP announced in October, to ascertain whether any of them would be prepared to participate in a restructuring or refinancing of the bonds. However, despite our attempts to engage, none of our shareholders has made any proposal to Johnston Press regarding the restructuring or refinancing of the bonds generally or submitted bids as part of the FSP.
Overall, although bids were received as part of the FSP, after careful examination with our advisors, the Board was forced to conclude that none of them would allow repayment of the bonds in total.
So, the outcome from the Strategic Review delivers the least possible disruption to the business, and the communities that Johnston Press titles serve. If this deal is approved, the debt will be reduced, new money will be provided by the new owners, and the business will be in a more stable position.
We are very confident that this is not the end of the story, but the beginning of a new phase in which we work with the new owners of the group to give shape to a new future.
As the intended leader of the proposed new company I will be in touch again as soon as possible over this weekend to update you on the progress towards our goal of securing the future of the business for everyone.
David King, Chief Executive
Q. What has happened?
Q. What happens now?
Q. Do we still come into work as normal?
Q. How safe is my job? Will there be any job cuts?
Q. Will I still get paid?
Q. Should I come to my normal place of work?
Q. Has my role within Johnson Press changed as a result?
Q. Is my pension safe?
Q. What should I be saying to suppliers and customers I work with?
Q. What should I say if I get contacted by an external journalist?
Q. How does the administration process work?
Q. Did the company know this was going to happen? How long has this been planned for?
Q. Who will own Johnston Press now?
Q. What is going to happen in the next few weeks/ months?
Q. Will the new owner close down any of the titles?
Q. How does today’s announcement affect the day to day running of Johnston Press?
Q. Where can I get more information? Who should I contact?