Troubled Johnston Press, owner of The Scotsman, the i newspaper and the Yorkshire Post, is facing a showdown this coming week with an activist fund that is one of its top 10 shareholders, according to a report in The Sunday Telegraph.
The Guernsey-based Crystal Amber Fund, which controls a 3.3% stake in Johnston, is expected to meet Johnston Press chairman Ian Russell on Tuesday, the newspaper said.
The fund will wait until after the meeting before deciding whether it will start to agitate for change at the publisher, the report said.
Crystal Amber has a track record of activist campaigns that include putting pressure on firms to put themselves up for sale.
Johnston’s share price has collapsed over the past two years and its debt levels are causing concern among investors.
Johnston said last month its net debt was £137.7 million. The firm’s share price has collapsed to about 8p which gives it a stock market value of a mere £8.5 million.
Last month, Moody’s Investors Service downgraded the bond (debt) ratings of Johnston Press deeper into “junk” territory, expressing concerns about the company’s liquidity.
Moody’s said: “Given the structural challenges of the print industry as well as the uncertainty over advertising demand in H2 2016, we believe that the company liquidity profile is weak with meagre to neutral adjusted free cash flow generation expected in 2016 and heightened risk of a breach under its RCF (revolving credit facility) covenant as this continues to tighten.”
Moody’s said it viewed Johnston Press’ liquidity profile as weak, despite the company historically generating positive free cash flow.
Moody’s said it believed that access to the company’s revolving credit facility “could be jeopardised by a potential covenant breach resulting from the compound effect of the weakening performance and the scheduled tightening of the covenant level.”
“Based on H1 2016 results, Moody’s estimates that the company’s headroom under its RCF covenant is now well below 10%,” said the ratings firm.
Johnston Press publishes 13 paid-for daily newspapers, 154 paid-for weeklies, 37 free newspapers and a number of lifestyle magazines.
The company recently announced plans to dispose of some “non-core assets” and use the proceeds to repay debt.