THE administrators of the owners of The Scotsman have warned of "significant shortfall” of cash for creditors as it emerged the value of the Edinburgh-based titles had collapsed from £160m to £4m.

Johnston Press, the regional newspaper publisher, which owns the i and the Yorkshire Post was rescued by creditors through a newly formed company JPI Media over the weekend, in a controversial insolvency procedure that enables firms to be sold off without its liabilities, such as pension debt.

In its first report for creditors, AlixPartners said that while funds would be available for distribution to secured bondholders, and prescribed unsecured creditors, of Johnston Press, “there will be a significant shortfall to creditors”.

Creditors will include the government's pensions lifeboat, the Pension Protection Fund, which is expected to lodge a claim of more than £300m in a bid to salvage funds for thousands of former and current staff.

READ MORE: The Scotsman owner Johnston Press puts itself up for sale

As part of the purchase by JPI, the company set up by Johnston Press’s lenders, the 250 current staff and 5,000 former employees who are enrolled in the newspaper group's defined benefit scheme would be transferred to the PPF.

But at the reduced level of payments to scheme members that the PPF pays, the scheme’s funding shortfall would be around £109m.


The report reveals that the Edinburgh titles encompassing the Scotsman, Scotland on Sunday and Edinburgh Evening News newspapers and the website, are given an “IP – intellectual property – value” of £4.3m.

The Scottish newspaper group was purchased for £160m from the Telegraph’s owners, the Barclay brothers, in 2005.

The report also revealed that Johnston Press received several offers for the company before it filed for administration. The best offer valued the company at between £140m and £150m, significantly less than the £220m Johnston Press owed its bondholders and not enough to cover its liabilities.

The report values the offer made by the consortium, which is operating as JPIMedia Group, at £181m. The deal included slashing Johnston Press’s debts to £85m, injecting £35m in cash, paying all trade creditors and continuing to employ and pay its 2,000 staff.

“We explored every avenue, including shareholder-led refinancing, refinancing through the markets, a regulated apportionment arrangement that would have addressed the pension issue so we could come to a new arrangement over our debts or pursue a debt-for-equity swap, and of course a formal sales process,” said Camilla Rhodes, chairman of Johnston Press. “Sadly, despite our efforts, it wasn’t possible to achieve any of them.”

The controversial pre-pack administration and subsequent sale provide “the best possible outcome in order to preserve jobs and newspaper titles”, she said.

There has been concern that the owner of Johnston Press, who saved it after it fell into administration, was 'dumping' responsibility for staff pension schemes.

PPF's concerns are understood to surround the timing of the move to administration said to have come 48 hours before a scheduled pension contribution was due, raising concerns over whether alternative measures were fully explored.

The Pension Regulator has said it had begun a probe into Friday's rescue deal.