March 7, 2009 2:00 am
Mecom has warned of increasingly uncertain advertising markets in the first weeks of 2009, prompting a sharp fall in its already battered share price.
The European newspaper company, headed by the former Mirror Group chief David Montgomery, said it would have to make additional cost cuts to offset shortfalls in advertising revenue.
The group also confirmed that it would be in breach of its banking covenants by the end of March unless it can renegotiate the terms of its debt with lenders.
If it cannot, it will face a funding shortfall of £606.6m, including a £30.6m loan that must be repaid by April 12.
Mecom has been in talks with banks for several months and hopes the sale of its German media operations for £136m and of three newspaper houses in Norway for £66.7m will help bring the debt to more manageable levels.
"It is clear these disposals will put the group in an altogether stronger financial position and will equip us to engage in constructive and sensible discussions with our lenders," said Alasdair Locke, chairman, in a circular to shareholders.
The company said borrowing would come down to £422.6m if the disposals go through.
However, Simon Davies, a media analyst at Royal Bank of Scotland, said there was still considerable uncertainty over Mecom's future.
"Even after the disposals, the company is still carrying too much debt for the current environment," he said.
Mr Davies added that the company would have to make further disposals, as it could be facing a 50 per cent decrease in earnings compared with last year.
Mecom owns more than 300 titles in the Netherlands, Denmark, Norway, Germany and Poland.
Shares in the company fell 15.8 per cent, or 0.6p, to close at 3.2p yesterday.
Copyright The Financial Times Limited 2016. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.