Monday, December 22, 2008

Informa Looks to Reduce Debt

The Independent reports that Informa is considering seelling some assets to reduce its debt burden. There have been rumours that Informa is concerned about the possibility of breaching its banking covenants. Certainly the City has been marking down its stock because of the high level of gearing.

Covenrants get tighter as time goes on. They are agreed on the basis that the business grows and in interest cover improves (thats profit/interest due). As trading weakens a breach becomes ever more likely. Informa is not admitting to any possible future breach and they remain confident, but not so confident that disposing of assets to raise some cash is not being seriously considered.

It is not a good time to sell anything - just ask the Board of Reed Elsevier.

Next year I am expecting at least one "oh my god!" moment when something really ugly happens to one of the big players. Informa is already putting down a marker that they don't want it to be them.

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