Can SMG steer itself out of troubled waters?

Scottish Media Group (SMG) have moved to quell speculation that the debt-laden broadcast giant is on the verge of selling off sections of its business.
On Friday March 15, SMG revealed that it had been in discussions with banks how to renegotiate its principal borrowing facilities. The deal may assuage shareholders concerned by the group's £390 million debt and dwindling advertising revenues.
The company said: "SMG can confirm that it has reached, in principle, agreement with the co-ordinating committee of its debt providers, in a form acceptable to SMG, on the key terms for the provision of sufficient funding to satisfy group requirements until June 2003."
Prior to the announcement there had been mounting speculation that SMG were preparing to divest itself of assets such as Grampian and Scottish Television. Indeed, it was reported in the 'Scotland on Sunday' newspaper that Capital Radio had mooted a £700 million takeover proposal for the group.
However, a spokesman for the company rebuffed the story claiming that it was "complete nonsense" having originated from rival publisher Andrew Neil's newspapers. Mr Neil, the spokesman went on to say, had "made no secret of his desire to run our newspapers".
SMG have faced criticism of late from analysts over the recent acquisition of Ginger Media for £225 million and the purchase of a 28 per cent stake in Scottish Radio Holdings. Both entities were said to be over-valued at the time of sale and have subsequently not performed as well as had been expected. Especially so, given that Virgin Radio's main asset, DJ Chris Evans, parted ways with SMG after the takeover.
The company had been suffering from the advertising downturn. In an interim report last September, Andrew Flanagan, Chief Executive of SMG, said: “This is the toughest advertising market of recent times, and visibility is poor enough to make predictions unwise at present."
There has also been speculation that STV would lose its lucrative Scottish Premier League licence. The contract with the SPL runs out this year and football league bosses are believed to have held talks with Granada for the rights to broadcast games in recent weeks.
SMG's deal with lenders on Friday is said to be subject to final approval from each bank's credit committee. The company said that its "underlying performance in 2001 was in line with market expectations and it continues to satisfy all of its funding obligations from its established, market leading businesses which remain profitable and cash generative".
Scottish Media Group, www.smg.plc.uk
(GMcG)