The strange case of Wilson & Horton's $432m black hole

By Nick Stride

Friday 9th November 2001

Analysts were yesterday puzzling over the apparent disappearance of $432 million of debt from Wilson & Horton's balance sheet.

Under a recently announced deal the newspaper group's owner, Ireland's Independent News & Media plc, is selling Wilson & Horton to Australia's APN News & Media.

As INM also owns 40% of APN the deal is a related-party transaction and the approval of APN's minority shareholders is needed.

APN proposes to pay $A809 million ($1.01 billion) for Wilson & Horton, which publishes the New Zealand Herald and regional and community titles, owns one of the country's largest printing groups, and has a 33% stake in The Radio Network.

APN's documents show it will also take on "financial liabilities within the Wilson & Horton Group" of $A429 million ($536 million).

However, Wilson & Horton's annual report for the calendar 2000 year shows group term debt of $1.15 billion, of which $1 billion is a loan from INM Finance, a subsidiary of the Irish parent company.

Part of the $614 million discrepancy is accounted for by the $182 million of preference shares held by former Wilson & Horton shareholders.

These will be redeemed by INM in November 2003 for either $8 a share cash or two INM shares.

The whereabouts of the remaining $432 million remains a mystery.

APN chief executive Vincent Crowley referred inquiries to INM's chief financial officer, James Parkinson, in Dublin. By press time Mr Parkinson had not responded.

The question is of significance to shareholders in Sir Anthony O'Reilly's debt-laden INM.

INM has debts of E1.56 billion ($3.3 billion) and shareholders' funds of E305 million ($655 million), giving it a gearing ratio of 84%.

The APN/Wilson & Horton deal effectively shifts some of that debt burden into APN, of which INM will own up to 45% if the merger goes ahead. APN's gearing ratio will rise to 88%.

Wilson & Horton's debts have knocked the profit and loss account around over the last three years.

In 1998 it booked a $119.1 million bottom-line loss including $114.6 million of unrealised foreign exchange losses.

In 1999 a $185.8 million profit included $161 million of unrealised currency gains. Last year it switched its debt into New Zealand dollars, booking a $2.4 million deficit after realising $25.7 million of currency losses.

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