Independent's €200m debt: who will blink first?
June 19, 2009
The €200 million (R2.3 billion) game of financial chicken continues between the board of Independent News & Media (INM) and its bondholders, with an offer from the bondholders to underwrite a €100m rights issue by the company.
The proceeds from the rights issue would be used to repay the bondholders, which essentially means they would be converting a portion of their debt into equity.
At a meeting on Tuesday, the bondholders also proposed that the company issue, to the bondholders, a €100m convertible bond at a 30 percent discount to the ruling market price.
The proposal looks like an extremely expensive way of dealing with INM's harrowing debt, and is likely to be too unpalatable to secure the necessary support from the group's two major shareholders, Denis O'Brien and Tony O'Reilly. If existing shareholders did not take up their rights in the €100m rights issue, the bondholders would emerge with 90 percent of the company, leaving existing shareholders with just 10 percent.
A six-week debt standstill, secured last month, expires at the end of next week.
At last week's annual general meeting, the board told shareholders that it expected the three assets up for disposal (including 100 percent of Clear Channel) to be sold by the third quarter and to realise up to €150m. The board revised downward its forecast for operating profit before exceptionals to between €180m and €210m for financial 2009. This was down from the forecast two months ago of €200m to €230m.
The minute waltz
The competition tribunal's hearing into allegations that Pioneer Foods was involved in a price-fixing cartel with all its major competitors got off to a great start this week. Pioneer's determination to challenge the competition commission's allegations meant that this was the first time the bread price-fixing charges were aired in public.
This fact alone ensured that the tribunal hearings would generate a lot of fascinating insight into the workings of the industry.
But day one of the questioning exceeded even these great expectations. An executive of Premier Foods, which was the first company to come clean on the price-fixing activity, told the tribunal that minutes of the meetings in which price was discussed with executives from other bread companies were not kept because, if they were, it would lead to "a lot of …". This frankness goes way beyond providing an insight into how the bread industry operated in this country and touches on the sensitive management information challenges facing companies around the globe.
Essentially, in terms of the … management information system", harmless and "good" information is documented in detail, while harmful and "bad" information is overlooked and/or not recorded.
As applied to the local bread industry, this meant that meetings held by representatives of the country's largest bakeries to discuss ways of addressing the theft of bread crates could be minuted. However, meetings to discuss concerted moves to prevent bread distributors from controlling the bread price could not be minuted.
Pioneer's defence in this case appears to rest on the claim that while it was involved in some cartel-type activity up to 2002 and after 2006, it was not involved in such activity between 2002 and 2006.
It seems that the cartel arrangement between the bakers broke apart in 2002. It might have stayed broken, had it not been for the bread distributors that were using their muscle in various regions to secure generous margins between the bakers' price and the retail price. The bakers came together in 2006 to counter the assumed power of the distributors.
Software strike
Trade union federation Cosatu, at war with the Reserve Bank, with business and even with the government it helped bring to power, has now been attacked from cyberspace.
A Google search for the organisation's site shows all links bear a warning sign: "This site may harm your computer."
So anyone who ventures to visit will have to risk their computer.
Patrick Craven, Cosatu's spokesman, says the warning appeared about three weeks ago, presumably because the site was attacked by a virus. He has no idea whether computers will in fact be harmed by the site - but so far, Cosatu has not received any complaints. Cosatu is investigating, says Craven.
According to Google.com: "This warning message appears with search results we've identified as sites that may install malicious software on your computer."
The search engine warns: "Malicious software is often installed without your knowledge or permission when you visit these sites, and can include programs that delete data on your computer, steal personal information such as passwords and credit card numbers, or alter your search results."
However, there are scams within scams. A Google search for the phrase "this site may harm your computer" reveals endless complaints from site owners saying they have been mistakenly labelled harmful, at great cost to their business.
Ezinearticles.com carries this warning: "Typically a legitimate (Google) warning will read 'Advisory provided by Google'. This means it is probably real.
"A fake warning will say: 'Warning - Visiting this website may harm your computer!' It will then invite you to download anti-virus software. Well, don't do it!" Ezinearticles.com warns. "What happened is you were infected with a browser hijacker, which is attempting to use scareware to scam you out of money and get your personal information."
If Ezinearticles.com test is accurate, Cosatu is the victim of a malicious attack.
However, Ezinearticles.com also offers its own programs to remedy the problem. Who knows what's what in cyberspace?
Edited by Peter DeIonno. With contributions by Ann Crotty, Samantha Enslin-Payne and Ethel Hazelhurst
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