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Last Updated: Tuesday, 6 November 2007, 15:58 GMT
SMG seeks investors to cut debts
SMG logo
The media group has moved to reduce its debt burden
Shares in the media group SMG have tumbled after the company turned to investors to try to cut its debts.

The company, which operates STV in Scotland, issued new shares worth 95m which it said should reduce its debt burden to about 40m.

The new money should also help it avoid a cut-price sale of its Virgin Radio business while helping to reduce its interest charges.

SMG's shares fell by 15% at the news but closed the day up 5.25%.

Appetite for a float or trade sale of Virgin Radio had waned in tighter credit markets, but SMG said the cash would allow it to sell Virgin from "a position of strength".

Chief executive Rob Woodward said the fund-raising manoeuvre was "an important step in the transformation of the group's balance sheet".

Analysts have predicted the company will pay 15m in interest charges this year.

This bill was set to soar still higher in 2008 before the rights issue, which will take place later this month.

Cost-cutting moves

The group postponed the sale of the station in September after offers reportedly came in below its 80m target price.

Virgin's book value was written down to 105m earlier this year - a lot less than the 225m SMG paid in 2000 when it bought the station from DJ Chris Evans's Ginger Media Group.

SMG's other moves to reduce debts include the 62m sale of its Primesight billboard advertising business to private equity firm GMT Communications in September.

Loss-making cinema advertising business Pearl & Dean is also earmarked for disposal, leaving the group focused on Glasgow-based STV, which also has news studios in Aberdeen, Dundee, Edinburgh and Inverness.

STV's production business has made hit peak-time dramas such as Taggart and Rebus.

SMG is also looking to save 2.5m this year through cost-cutting moves, with similar levels of savings aimed for in 2008.

SEE ALSO
SMG puts businesses on the market
27 Jun 07 |  Scotland
SMG plans Virgin Radio flotation
12 Apr 07 |  Business
SMG and Ulster TV talks shelved
28 Feb 07 |  Glasgow, Lanarkshire and West
UTV scraps plans for SMG merger
20 Sep 06 |  Business
SMG puts Pearl & Dean up for sale
13 Sep 06 |  Business
Virgin Radio firm rejects merger
29 Aug 06 |  Business
Scottish Media Group head resigns
18 Jul 06 |  Scotland

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