The Daily and Sunday Telegraph papers and the Spectator Magazine will be sold after the Lloyds Banking Group forced their parent company into receivership over the £1bn in debts owed to the Barclay Family, which owns the titles that dominate rightwing media discourse.
Lloyds confirmed that the bank had placed B.UK in receivership. B.UK is a Bermudian holding company which controls the Telegraph Media Group. AlixPartners was appointed receiver of B.UK
Aidan Barclay & Howard Barclay – the sons and successors to Sir David Barclay – have been removed from their positions as directors at TMG & The Spectator.
AlixPartners stated that the defenestration of these directors was part of a number of changes made to the boards at companies linked to B.UK in order to “secure the assets”. This would allow for a “resolution that may include sales of the Telegraph or Spectator business”.
In 2004, Sir Frederick Barclay, his brother David and their company acquired the Telegraph papers. Lloyds acquired the family loans in 2008 when it took over HBOS, a failing lender. Since then they have been written off as bad debts.
According to sources familiar with the matter, the debts are higher than initially reported. They amount to close to £1bn. The debts are being held by a complex cascade of offshore companies which ultimately controls the Barclay media assets.
TMG will not be placed into administration.
On Wednesday, the family was still trying desperately to save the assets. However, those who were close to the discussions said that Lloyds had grown impatient with the situation. One person stated that the bank was moving quickly and aggressively. The lender stated that it was “willing” to continue the discussion with the family.
Barclays stated in a press release: “We are hopeful of reaching an agreement that is satisfactory to all parties.” AlixPartners has made it clear that this situation is not related to the financial performance or health of the Telegraph and Spectator business.
According to someone familiar with the matter, there is no financial impact expected on Lloyds because the loans were classified as impaired for a long time. The British bank will write off any profits.
Analysts estimate that the titles are between £500mn to £700mn in value.
A person with a close relationship to Lloyds stated that this was not a fire sale; the bank has yet to be appointed to supervise any transaction. Lazard advises Lloyds about options for the company. Lazard declined comment.
The Lloyds’ Bank of Scotland’s unit issued a statement saying: “The appointment of receivers was a last resort, and followed numerous discussions with B.UK’s mother company, Penultimate Investment Holdings Limited.
The aim of the discussions, which lasted for a long time and were conducted in good faith, was to reach a consensus and repay PIHL’s loan to Bank of Scotland. Unfortunately, there was no agreement, leading to the appointment of receivers.
The Barclay brothers’ ownership of the Telegraph papers would end with a sale. The twins bought the Daily Telegraph from DMGT (owner of Daily Mail), Axel Springer, and private equity firms led by David Montgomery, former Mirror CEO.
In a Wednesday message to Telegraph employees, Nick Hugh expressed his confidence that the newspaper will “continue to prosper and grow”.
TMG has in the past attracted potential buyers, although a formal process of sale has not been confirmed. Former executives claim that rival media groups like DMGT were interested in the deal, but any deal would have to be approved by the competition authority. Daniel Kretinsky, a Czech energy tycoon , also considered buying the broadsheet by 2020.
Mediahuis is another potential bidder. It already owns both the Irish Independent and the Dutch De Telegraaf. Murdoch MacLennan is the chairman of the latter, who was the former CEO at the Telegraph. Analysts speculated on bids by wealthy City grandees with a right-leaning, such as Paul Marshall who owns a significant stake in GB News.
According to Claire Enders, media analyst, Saudi Arabia and other Middle Eastern funds have expressed interest in buying a UK media group. However, she warned that the UK government could oppose their purchase.
Enders stated that the sale of Spectator could be easier. She stated that Rupert Murdoch’s media group, among others, would be interested to acquire the influential British magazine. This would not face the same antitrust scrutiny as a bid on the entire Telegraph group.
TMG’s sales for the year ended January 2 were £245mn (up from £235.2mn) and its pre-tax profit was £29.6mn (up from £22.1mn in the previous year).
Barclays spokesman said: “The companies in our portfolio continue trading strongly, they are managed by independent management teams and are well-capitalised, with minimal debt, strong liquidity. They are not liable for holding company liabilities and continue to run as usual.
Lloyds’ decision does not affect other parts of Barclays, such as the online retailer Very. However, restructuring experts are closely monitoring the other parts of Barclays’ business. Carlyle is a private equity company that has acquired a stake in Very Group’s debt, according to sources familiar with the situation.