Photon Group likes to describe itself as "Australia's largest marketing and communications group"; yesterday it confirmed in an update on its trading performance and capital structure, that it is one of the weakest companies on the ASX, with debts significantly outweighing its $191 million market value, and over $160 million in deferred payments unable to be made.

In short, Photon is lucky to be alive and listed as it struggles to devise a capital restructure that will help it keep its head above water.

Dividends for the suffering shareholders are out for the foreseeable future.

Photon shares have been suspended now since June 9 as management, led by new CEO, Jeremy Phillips, assess the group's finances, capital structure, negotiate with bankers on the huge debt and try to find ways of keeping the company going.

The shares were at $1.02 when they were suspended. They won't be at that level when the relist, whenever that is.

Photon paid an interim dividend of 3c a share for the December half, despite earnings plunging almost 45% to $2.8 million for the first half.

That payment will be the last for a while as it appears from yesterday's statement that Photon is looking at losses (including write-downs and one offs) of $100 million or more for the year to tomorrow (June 30).

It has debts approaching $300 million, unpaid consideration with the vendors of various businesses of around $170 million, and no earnings to service to repay either.

The report yesterday from the company was depressing, losses, falling profitability, poor performing businesses, huge bank debts (relative to the company's size).

In short the group is short of cash and long on red ink and debt.

It suspended dividends yesterday. The company paid dividends of 11.4c a share in 2009.

The company said in its update yesterday that "primarily as a result of the continued underperformance of its Internet & E-Commerce division and adverse currency impacts, it expects FY2010 normalised EBITDA (excluding one-off costs) to be approximately $75 million, FY2010 normalised NPAT (excluding one-off costs and non-cash impairment charges) to be approximately $19 million, and FY2010 normalised NPATA (normalised NPAT adjusted for amortisation associated with acquired intangible assets) to be approximately $28 million."

"The majority of Photon's businesses continue to perform strongly, with growth in normalised EBITDA from FY2009 to FY2010 expected in three of the five divisions on a constant currency basis.

"However, the decline in the Company's Internet & E-Commerce division and adverse currency impacts are expected to reduce FY2010 normalised EBITDA by approximately $16 million and $5 million respectively.

"One-off costs and non-cash impairment charges are expected to comprise:

"Approximately $28 million - $31 million in one-off costs relating to losses on discontinued or divested businesses, provisioning for restructuring, impairment of working capital and other items (including transaction costs, adviser fees and redundancies); and

"Approximately $90 million in non-cash intangible impairment charges relating entirely to the Internet & E-Commerce division.

"The estimates above have been prepared on the basis of the reported December 2009 half-year result, five months of unaudited management accounts, and management estimates for June 2010.

"Following a detailed review of the performance and outlook of operating entities subject to deferred consideration arrangements, the Company estimates total future deferred consideration payments to be approximately $176 million.

"Photon expects the deferred consideration liability that will be reported on the balance sheet as at 30 June 2010 will be approximately $167 million representing the present value of the deferred consideration payments. (that's what's left of the amounts still to pay for businesses Photon bought in its expansion phase)

"Photon has commenced discussions, which are confidential and incomplete, with vendors of some operating entities with a view of restructuring the deferred consideration arrangements.

"The restructure of these deferred consideration arrangements is designed to cap the potential liability and convert some portion of the deferred consideration payments into Photon shares for those arrangements that are restructured.

"Photon expects its bank debt as at 30 June 2010 will be approximately $271 million.

"The Company has obtained bank waivers through to 30 September 2010 in relation to its covenants as at 30 June 2010 and as a result remains in compliance with all of the obligations under its existing debt facilities.

"Photon has also agreed the terms of new three year facilities of up to $305 million to refinance the existing debt facilities and to provide additional funding, subject to formal documentation, customary conditions precedent and the completion of an equity raising.

"With the recent appointment of Mr. Jeremy Philips as the new CEO, Mr. Tim Hughes will cease as Executive Chairman with effect 1 July 2010 and remain on the Photon Board as a non-executive director.

"Photon has instructed Russell Reynolds to conduct a search for three new additional independent, non-executive directors to appoint to the Photon Board. It is anticipated that one of the new appointments will become non-executive Chairman.

"Current non-executive director, Mr. Brian Bickmore, has accepted the position of interim Chairman until a new Chairman can be appointed.

"Photon has commenced a review of its capital structure which is ongoing.

"The review is considering a range of options to reduce existing drawn debt and manage deferred consideration liabilities including, but not limited to, the restructure of deferred consideration arrangements and a potential capital raising.

"The Board has determined to suspend future dividends until further review.

"As previously announced, the Company has appointed Macquarie Capital Advisers Limited and UBS AG, Australia Branch to act as its financial advisers.

"The Company will make a detailed announcement when the review is completed. The Company's shares will remain voluntarily suspended until such time as that announcement is made."

In short Photon is cash short, debt heavy and depends on its banker's forbearance to see it through.