February 19, 2009 2:00 am
Mecom looks likely to meet an imminent test of its debt levels after selling several of its Norwegian newspaper assets.
The European newspaper group, headed by the former Mirror chief David Montgomery, is facing a covenant test at the end of the month amid concerns about its €650m (£575m) net debt pile.
However, analysts said that its balance sheet should be stabilised for the time being, after raising about £54.4m from the sale of three media houses in northwestern Norway to Polaris Media, a local rival.
Two of the newspapers sold have been operating in the region for 120 years.
Along with the sale of its German titles last month for €152m and smaller disposals, Mecom should "squeak through" its test with lenders on February 28, said analysts at Numis.
"If trading doesn't deteriorate further, for the time being they have the right capital structure," said Lorna Tilbian at Numis.
Mr Montgomery ended a long relationship with Numis as Mecom's broker after an attempted boardroom revolt last month.
Five non-executive directors and the finance director resigned after citing concerns about Mecom's management and strategic direction.
Cenkos was appointed earlier this month, joining JPMorgan Cazenove as the corporate broker and Rothschild as financial adviser. Mr Montgomery said in a statement that through the Norwegian and German deals "we have delivered value to shareholders by strengthening Mecom's balance sheet in the current market".
Numis calculates the sale valued the Norwegian assets at about 9 times operating profit, compared with 8.4 times for the German titles. At its current share price, Mecom trades at an enterprise value 6 times operating profit.
The disposal is conditional upon approval from Mecom's banks and shareholders, as well as local regulatory clearance.
Mecom still holds several titles in Norway.
The company's shares rose yesterday 0.6p to 3.3p.
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