Scotsman Owner Closes In On £140m Share Sale

The regional newspaper publisher which owns The Scotsman and The Yorkshire Post is closing in on a financial restructuring that could involve raising as much as £140m of new equity.

Sky News understands that Johnston Press (LSE: JPR.L - news) was on Thursday close to finalising the terms of a refinancing aimed at providing breathing space for the board of one of the UK's biggest publicly-quoted newspaper groups.

Details of the deal with its lenders were on the verge of being rubber-stamped after months of talks, and insiders said that an announcement could be made as soon as Friday.

The agreement is expected to involve in the region of £140m being raised from a placing of shares and rights issue, as well as an extension of Johnston's debt facilities for several years beyond their existing expiry date of 2015.

Ashley Highfield, the former BBC and Microsoft (Berlin: MSF.BE - news) executive who runs Johnston, is understood to have been pressing for a deal that will resolve the issue of the company's financial security after years of uncertainty about the impact of its £300m debt burden.

Last December, the company, which also owns the Northampton Chronicle, Bognor Regis Observer and Arbroath Herald, said it had reset its financial covenants with its lenders.

In a further statement last month, Johnston said it was examining a share sale, although the £140m figure is significantly higher than analysts' forecasts.

Like other local newspaper publishers, Johnston has seen its business suffer from the impact of catastrophic advertising revenue declines.

Its response, which has included closing underperforming titles and redeploying savings on digital initiatives, has begun to pay off, with underlying operating profit up 2.5% in the year to December 28.

Johnston recently sold its business in Ireland (Other OTC: IRLD - news) to Iconic Newspapers for just over £7m.

Mr Highfield is understood to have been encouraged by the response of existing and new investors to his plans for the business.

A number of new institutional shareholders are expected to acquire stock as part of the fundraising.

Rothschild, the investment bank, is advising the publisher on the restructuring.

Johnston declined to comment on Thursday.