The board of  Independent News & Media (INM) on Monday rejected a restructuring plan proposed by its second-biggest shareholder Denis O’Brien and backed chief executive Gavin O’Reilly's proposed deal with bondholders who are owed €200 million, which has been due for payment since last May.

In a statement last night, INM said the refinancing deal agreed in principle with bondholders and banks would deliver on the objective of achieving a solution that was“capable of implementation outside of a court-administered process.”

Denis O'Brien, who has a 26.14% stake in INM, proposed raising it to 67 per cent stake in in return for a €100 million investment.

INM said O'Brien's plan raised “significant competition law and media plurality issues” linked to an assumption of control by him of Ireland’s largest media group.

The INM board-backed plan will see both Denis O'Brien's stake diluted and that of the O'Reillys.

INM said its banks have indicated that they are supportive of its plan which it summarised as follows:

• €123 million of the outstanding principal amount of the bonds to be exchanged for 723.2 million new ordinary shares representing 46% of the then issued share capital, with the balance of the bondholders’ claim (including accrued but unpaid interest) being applied to underwrite a rights issue;
• INM existing shareholders to be offered an opportunity to participate in the restructuring by means of a rights Issue of up to €94 million at an issue price of €0.05 per share;
• INM existing shareholders able to retain approximately 52% equity interest (assuming shareholders take up their full rights entitlements);
• Proposed senior debt facilities based upon a 4 ½ year maturity and revised financial covenants to provide adequate headroom to accommodate prevailing trading conditions and expectations; and
• As part of the foregoing, the parties to the restructuring have consented to the disposal of certain businesses (as previously announced) for an aggregate sum of approximately €150 million. One of these disposals, INM Outdoor, will be subject to a vote at a specially-convened extraordinary general meeting of shareholders, details of which will follow in due course.

Commenting on the restructuring, Gavin O’Reilly said:“After intensive negotiations over a number of months, the company is pleased to be able to announce that an outline restructuring has been agreed in principle with the Ad Hoc Committee of Bondholders, which also has the broad support of our banks. The company acknowledges the support of its banks and the Ad Hoc Committee throughout its restructuring discussions and in reaching this key milestone.

“This restructuring will provide the INM group with a €350 million reduction in net debt in 2009 (through the combination of the equitisation of the bonds, the rights issue and the group’s previously-announced disposal programme) and a stabilised financial position.

“We now expect that all parties will move towards implementation of the Restructuring without delay, including procuring necessary consents and approvals.

“With economic fundamentals expected to recover over the medium-term, INM’s market-leading assets, restructured balance sheet and improved financial situation leave the Company very well positioned to benefit from any cyclical economic recovery.”