Johnston investor threatens legal action in event of pre-pack

Johnston Press has been threatened with legal action by its largest shareholder over rumours that the company may be pre-packed after its shares fell to an all-time low of 3p.

The business, which publishes titles include the i newspaper, the Scotsman, the Yorkshire Post and around 200 regionals and locals, has been in months-long discussions on how to refinance £220m worth of debt in high-yield bonds, repayable on 1 June next year.

With its current share price giving the company a market capitalisation of £3.9m, Swedish investor Christen Ager-Hanssen – whose Custos Group holds a 20% stake in Johnston – wrote to the board, in a letter seen by the Daily Telegraph, to address “speculation among investors” that the publisher could be placed into administration and sold on through a pre-packaged sale.

He said legal action would be taken if the speculation was revealed to be true. The letter is understood by PrintWeek to be Ager-Hanssen’s first communication with Johnston since November last year.

Ager-Hanssen wrote: “Of course, rumours swirling the market may be entirely false. But there are also rumours in the market that leaks have been made on purpose to manipulate the stock price to fall sharply which have as we know happened lately and damaged significant shareholder value.

“I am concerned that market manipulation may be at play and/or that information may have been leaked specifically so as to enable a pre-packaged sale on terms not in the best interests of the company.

“Please be aware, if formal insolvency and a sale of the business are in effect a serious game plan, my position and intervention must absolutely be considered.”

Johnston Press confirmed receipt of Ager-Hanssen’s letter over the weekend and pledged to respond to him directly this week. The company urged its investor to present a “workable proposal” in order to refinance the business.

One option floated by Johnston last month was to offload its pension scheme to the Pension Protection Fund, which would then hand control of the business over to its largest debtor – US hedge fund GoldenTree. However, no decision has been confirmed so far.

In a statement, a Johnston Press spokesperson said: “In March 2017, we announced a strategic review of the financing options in relations to the £220m bond that is due for repayment in June 2019.

“A number of potential strategic options are being considered by the company and its advisers which we expect to discuss with stakeholders in due course. We have updated the market on a number of occasions. No decisions have been taken and we are not going to comment on market speculation.

We announced in April that the business had EBITDA of £40.1m in 2017. It had cash at bank of £24.6m at the end of May. We announced on 5 June that the business was trading in line with expectations.

“If Mr Ager-Hanssen does have a workable proposal to refinance the business, we look forward to receiving this and we will invite him to provide more detail.”

Shares in Johnston Press have fallen at a steady rate since February 2015, when they stood at £1.72. The company’s peak came in April 2007 at £4.82 per share.

In May, chief executive Ashley Highfield announced he would step down from the top job at Johnston Press after nearly seven years to become a non-executive director for “family reasons”. He is set to be replaced by his chief financial officer, David King.