Doubt over Emap's future as it battles to boost its profits

Accounts for Emap International Limited for the year to 31 March show parent company Eden Bidco, a joint venture between private-equity firm Apax and Guardian Media Group, was "in compliance" with banking covenants on an estimated £700 million in borrowings.

But Eden Bidco risks breaching the covenants if Emap's profits fall "materially below the level seen in the first half of 2009". Pre-tax profits were £34 million in the year to March and the covenants are "dependent upon growth" in future profits.

Emap's accounts said: "The risk represents a material uncertainty which may require the intermediate parent company undertaking to revisit its covenants with its lenders and, if necessary, re-set its covenants which will also impact the company.

"A failure to agree a revision may cast significant doubt about the entity's ability to continue as a going concern."

While Emap issued the warning because of accountancy rules rather than an immediate threat to its future, it underlined the scale of its financial commitments.

Emap has £148 million of intercompany borrowing but does not disclose Eden Bidco's total debts.

Cayman Islands-based Eden Bidco is in talks with lenders including HSBC and Royal Bank of Scotland about relaxing covenants.

An Emap spokesman said its owners have "great confidence" in the business and told the Evening Standard it is "operating fully within its existing banking covenants" although "it is prudent for management to keep financing under review".

Profits in the six months to 30 September were "within 3% of its prior year results", the spokesman added.

Apax and GMG paid almost £1.1 billion to buy Emap in March 2008. Just 12 months later, Apax wrote down the value of its investment to zero because of the recession.

Last month Emap began charging for access to its magazine websites.