Paying the price: cost of Johnston Press’s debt

Sobering stuff as Peter Kirwan spells out the numbers underlying Johnston Press’s refinancing of £485m debt. As he puts it, “the maths are grim”, concluding that:

the running total for bank payments comes to £75.2m during the next year. Remarkably, this equates to an annualised interest rate of neither 5% nor 10%, but 15.5%.

This, remember, is before Johnston Press repays any of its outstanding loans. Here, too, the terms of the deal are draconian. In addition to everything else, the company has promised to repay £85m of debt by next May.

Now clearly, this is a lot of money for a rapidly-shrinking regional newspaper publisher that turned in £27.5m in pre-tax profits during the first six months of this year.

Kirwan then raises the prospect — if Johnston is unable to repay that £85m by May 2010 — of payment in kind (PIK) penalties, which could take the effective interest rate to 20% or more. Gulp.

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