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Thursday, January 29, 2009

VNU in Debt Mire

The Times has been reporting on the woes facing 3i owned VNU. You will remember that 3i bought VNU at the top of the market, selling off the Nielson business and seperately the UK business to Incisive Media. It is said that 3i are about to break their bank covenants which means only two solutions are available. Either 3i must put in some more equity, or the banks will seek a debt for equity swap.

3i have apparently said they won't do the former so the latter is feeling liek a bit of a certainty. All debt leverage business media companies must be worried, Incisive Media, backed by Apax has around £400m of debt, Informa too. The EMAP deal has debt also.
On a smaller scale so does Ocean Media.

Banks may demand the sale of assets to generate cash as an alternative or complementary approach to deby/equity swaps. If any of this happens no one will want any of this in the public domain if at all possible. To be clear, I am not saying this will happen to other comapnies as it appears to be happenning to VNU, but no one would be surprised if near term strategies for these businesses were determined by shrot time financing concerns rather than strategic vision.

All the more reason to be believe that the winners in five years time in the battle to be the business media company of the future have not yet been identified.

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