ITV scraps SDN sale, prepares £135m bond plan

LONDON - ITV has unveiled a major strategy U-turn by ditching plans to sell SDN, the landlord of Freeview channel slots.

ITV: ditching SDN sale
ITV: ditching SDN sale

The decision to cancel the sale of SDN, which operates various Freeview channel multiplexes, is part of a plan to address its pension deficit.

ITV said it has entered into "preliminary discussions" with the trustees of the ITV Pension Fund over an arrangement under which SDN would provide asset backing to the pension scheme. ITV said such a partnership would reduce the pension deficit, although it did not specify by how much.

Consequently, ITV said retaining SDN "offers greater potential value for shareholders and is therefore no longer planning to dispose of the business".

A sale, first mooted in February, could have netted ITV some £200m, according to reports.

Meanwhile, ITV announced plans to potentially borrow some £135m, by issuing bonds, to boost its balance sheet.

ITV will use the funds to extend its average debt maturity and diversify its funding. It insisted it has no current plans for a rights issue.

Separately, ITV updated the City on the state of the TV ad market. It said the rate of decline in UK TV advertising has "continued to ease across the second half of 2009".

It said that across all its TV channels, advertising revenues are expected to be down around 3% year on year in October and a "similar" decline in November. ITV added that it "remains on course" to outperform the TV advertising market across the second half of the year.

John Cresswell, ITV chief operating officer, said: "The actions  we are announcing today continue our work over recent months to strengthen the balance sheet, improve our debt maturity profile and proactively manage our pension deficit over the long term.

"With the proceeds of the convertible offering, to date this year we will have raised over £225m of new borrowing with maturities ranging from 2015 to 2019 and without financial covenants.

"Seeking to deploy SDN as asset backing to the pension scheme will help us manage our pension risk, while continuing to benefit from the strong cashflows that business delivers. We believe it is the right decision for ITV, maximising value for shareholders."   

"While we are not yet seeing a recovery in UK television advertising, the trend is improving across the second half and into the fourth quarter.  We continue to outperform the market and are on track to deliver the substantial cost savings we have set out."

ITV's net debt stood at £728m as of 30 June and its pension deficit stood at £538m.

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