The chief executive of Johnston Press has reassured staff of a “brighter future” after the company announced it was preparing to enter into administration.
Johnston Press is the UK’s fourth largest regional newspaper group publishing titles including the I, Yorkshire Post and The Scotsman.
In recent years it has struggled to pay back debt which currently totals around £220m and was built up during an aggressive expansion plan in the 1990s and early 2000s.
The share price closed at 2.75p on Friday giving the company a market capitalisation of £3.8m.
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In a statement on Friday night the board said it had concluded there was no value in the ordinary shares in the company therefore it has decided to place its principle subsidiaries into administration.
The statement said: “It is envisaged that, subject to the orders being made, all of the group’s businesses and substantially all of the group’s assets will then be sold to a newly-incorporated group of companies controlled by the holders of the bonds.
“Holders representing the required majority of the bonds have contractually agreed to support this transaction.
“The group believes this is the best remaining option available as it will preserve the jobs of the group’s employees and ensure that the group’s businesses will be carried on as normal. The group hopes that this transfer will be completed within the next 24 hours.”
In an email to staff seen by the Press Association, David King said the publisher will apply for court approval to be sold to a newly-incorporated group of companies controlled by creditors.
It informed staff they would continue to be paid and should turn up to work as normal, with their contracts to be transferred to the new company.
King is set to stay on as chief executive and said “operations will continue uninterrupted”, with newspapers and websites being published as usual.
One of Britain’s biggest publishers, Johnston has more than 200 titles in print and online,
The publisher has recently looking at ways to refinance its debt which is due to be repaid in June next year.
In the email to staff, King said: “At its peak, the company’s debt reached £793 million.
“We have all worked incredibly hard to reduce those debts. And we have done so against a relentlessly tough market backdrop.”
At its most recent trading update, Johnston reported a hit to revenues, mostly due to changes in Google and Facebook algorithms.
King said this meant the company had to “re-cut our cloth to match the new reality”.
Johnston will be de-listed from the London Stock Exchange as part of the process on Monday, King said.
He also revealed the 250 members of the current workforce in the defined benefit pension scheme will see future payments affected by the restructure, in line with pension protection fund (PPF) payment rules.
Speculation that the publisher might be sold had been growing since it announced the strategic review in March 2017.
In August 2018, the company’s share price spiked, surging by as much as 70% in afternoon trading amid rumours that a mystery buyer was quietly snapping up more stock.
Following the announcement Health Secretary Matt Hancock, formerly a culture secretary, tweeted to say the news was “very concerning”.
“Makes stark reality of the intense pressure on the press,” he added.
Shadow culture secretary and deputy Labour leader, Tom Watson, also tweeted his concern about the “late Friday announcement”, adding that he “will be reaching out to unions and staff over the weekend”.
In a second tweet he said: “Johnston Press going into administration is a grim day for local newspapers and another deeply worrying one for local democracy.”
Leeds North West Labour MP, Alex Sobel, tweeted to say he was sad that Johnston which owns The Yorkshire Post and the Yorkshire Evening Post was going into administration.
“Local papers raising local and regional issues are vital for our democracy,” he added.
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