The future of APN News & Media's chief executive Brett Chenoweth is under a cloud as its major shareholder seeks to oust him from the top job.
APN on Friday rushed to the defence of Mr Chenoweth as the beleaguered trans-Tasman newspaper group confirmed it was considering a capital raising.
One analyst said the development had as much to do with the weak financial position of APN's major shareholder, the Independent News and Media (INM), as it had with Mr Chenoweth's performance.
INM has been reported in the UK media as issuing a statement, saying it had "lost confidence in Mr Chenoweth's ability to implement the strategic initiatives necessary to reposition APN for the more challenged media landscape that has emerged in Australasia".
The Ireland-based INM, which owns about 29 per cent of APN, said it was "seeking the removal of Brett Chenoweth as director and chief executive of APN News & Media" and planned to call an extraordinary general meeting.
INM made no mention of any potential capital raising.
However, APN said in a statement to the Australian Securities Exchange, when requesting a trading halt on Friday, that it believed "these (INM's) comments arise from the fact that APN is considering a pro rata capital raising".
APN, which owns newspapers, radio, outdoor advertising and digital assets in Australia and New Zealand, said it was investigating the comments.
"The non-INM representative directors of APN unanimously support Mr Brett Chenoweth and the strategy being implemented under his leadership," APN said in the statement.
An APN spokesperson said Mr Chenoweth was not available for comment.
Morningstar analyst Michael Higgins said INM had been "struggling for a few years now" and therefore would have preferred APN not conduct a capital raising.
"You would have to think that INM would really struggle to participate in the capital raising," Mr Higgins said on Friday.
"They are obviously opposed to the rights issue because I don't think they actually have the cash flow to participate, so they are facing a potential dilution if they can't come up with the money for the capital raising."
APN's other major shareholder - funds manager Allan Gray which holds a 19 per cent stake - was also opposed any capital raising.
"A capital raising would certainly not get our approval at all," Allan Gray managing director Simon Marais told The Australian website on Friday.
"The share price is very low and there is no danger of capital breaches."
In a trading update on December 19, 2012, APN said it was expecting net profit for calendar 2012 at between $51 million and $54 million.
If the result prints in line with company guidance, it would represent a decline of up to 34 per cent from the $78 million net profit in the prior year.
The company was due to present its full year results on Thursday.
APN requested the trading halt on Friday until it made an announcement to the market regarding INM's comments, or at the start of trade on February 19.
The stock last traded at 30 cents.