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The auction of the Telegraph has been paused while Lloyds Banking Group reviews a debt repayment proposal that would ultimately give control of the British newspaper to an Abu Dhabi-backed investment group.
RedBird IMI — the investment vehicle led by former CNN boss Jeff Zucker — has offered to buy the newspaper through a debt-for-equity swap with the Barclay family, who had owned the publication for two decades until Lloyds put it into receivership this summer.
On Tuesday afternoon, the boards of the parent companies of Telegraph Media Group and The Spectator said the sales processes for each of the businesses would be paused until December 4.
If no deal is reached by then, Lloyds will resubmit an application to a judge in the British Virgin Islands to liquidate the company that sits above both groups, and holds the debts, in effect ending the Barclay family’s right to repay their debts.
Lloyds took control of the group after the Barclays failed to repay debts of more than £1.1bn, and kicked off an auction to sell the Telegraph Media Group and The Spectator. First round bids were expected by the bidders by the end of the month.
However, two people close to Lloyds said it would have been unfair to keep the process running while also reviewing the proposal.
The decision will frustrate bidders such as hedge fund billionaire Paul Marshall and DMGT’s Lord Rothermere, who have spent months lining up their offers.
The Barclays have agreed a complicated deal with RedBird IMI, which is part funded by Sheikh Mansour bin Zayed Al Nahyan’s private investment group International Media Investments.
RedBird will offer a £600mn loan to repay part of the outstanding debt, which will then convert into shares, giving the group ownership of the Telegraph and Spectator. Another loan of about £600mn will be provided by IMI to repay the remainder of the money, and this will be swapped for a corresponding debt stake in the family’s Very Group, a UK financial services and retail business.
The Barclay family now have until early December to secure the funds from RedBird and repay the loan. The deal to pass ownership of the Telegraph will also be scrutinised by government ministers, who will need to decide whether the ownership structure poses any risk to national interests.
RedBird IMI has said the newspaper will be overseen by the New York-based Zucker, and has promised editorial independence.
Conservative MPs have raised concerns about the deal, with several last weekend writing to government ministers warning over the prospect of an Abu Dhabi-backed group taking control of the Telegraph.
Former UK minister David Davis on Tuesday said he had now also written to the government saying that whoever is involved in the deal — regardless of whether it is financed through debt — the public should be made aware.
Davis noted the low profit margins of the business made it clear that no one was interested in financial returns alone. “You must be buying it for other reasons — influence, respectability . . . but that means the state has to use its brains,” he said, adding any deal should trigger the so-called “fit and proper owner” test by the Competition and Markets Authority.
“Organs like the Telegraph have a huge amount of influence over things like the next leader of the Conservatives,” he noted.
Lawyers for Marshall have argued that culture secretary Lucy Frazer should issue a Public Interest Intervention Notice to allow Ofcom to investigate the deal. The Commons culture committee has also said it would look at foreign state ownership of UK media assets.
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