MediaNews Group holding company announces financial restructuring
Editor’s note: The Park Record is owned by MediaNews Group
Affiliated Media Inc., the holding company for Media News Group, and its lenders have agreed on a plan to restructure $930 million in debt, the Denver-based company announced on Friday.
The agreement swaps debt for equity, retains the current management team and excludes all of the company’s media properties, which include The Denver Post and Boulder Daily Camera, according to the announcement.
The plan will be implemented in the near future through a pre-packaged Chapter 11 bankruptcy filing.
"It gives us one of the strongest balance sheets in the industry," said MediaNews chairman and CEO William Dean Singleton. "It gives us breathing space to create a new model for the newspapers we publish."
Because all of the company’s individual media properties will be excluded from the filing, advertisers, vendors, employees and subscribers will be unaffected, Singleton emphasized.
The company is current on all vendor payments and has adequate cash to fund all operations. No layoffs or wage cuts are planned because of the reorganization, Singleton said.
The company distributed a press release and memo to staff at all of its properties late Friday.
Senior lenders, who are owed about $590 million, will obtain a majority of the equity in the reorganized company and proportional shares of a smaller $150 million term-loan under the plan. That group, led by Bank of America, will appoint three of the company’s seven board seats.
Singleton and MediaNews president Joseph Lodovic will own 20 percent of the equity, with rights to additional shares in the future. They will appoint four directors on the board, giving them control.
Holders of subordinated bonds with a face value of another $326 million will receive warrants they can exchange in the future for stock. All other stockholders in the privately-held company will have their current interests cancelled, including the Scudder family and the Hearst Corp.
Singleton, who once owned as much as 45 percent of MediaNews Group and currently has 31 percent, will see his interest fall below 20 percent.
"This reorganization does not come without pain," Singleton said. "Current shareholders will be losing the value of their holdings. But we believe that adopting this plan will give us a far better platform from which to develop, grow and participate in the consolidation and re-invention of the newspaper industry."
Newspaper publishers and broadcasters have struggled with slumping advertising sales, a trend the recession accelerated. Sustained double-digit revenue declines have left many publishers unable to support their debt payments. More than a dozen media companies are trying to reorganize or have already done so.
Last Spring, MediaNews reached an agreement with its lenders to make interest-only payments on its debt and started to negotiate a restructuring. The company worked out a separate agreement to rework loans used to finance The Denver Post’s operations last summer, avoiding a bankruptcy filing.
Affiliated had sought a similar arrangement, but the large number of bondholders, not all of whom could be located, made it necessary to take the plan into court.
A prepackaged filing, unlike restructuring plans crafted by a borrower or those forced by a lender, has had terms agreeable to both sides hammered out in advance. That requires less time in court. The company expects to complete the process within a month or two.
Compared to other newspaper groups, MediaNews is faring better financially, Singleton said. All of the company’s newspapers are profitable except one, although revenues continue to decline. Circulation counts for the six months ended in September are down 4.8 percent for the company’s daily publications, not counting gains after the Rocky Mountain News closed, compared to a 10.6 percent decline for 379 U.S. newspapers.
Having to pay interest and principal on $165 million in debt rather than $930 million should free up substantial cash for the company.
The larger stake lenders are acquiring in newspapers could reshape the industry. Banks can’t retain the ownership stakes they acquire in a restructuring for more than five years. Possible exit strategies for lenders could include taking acquisitions public, selling to management over time or helping finance an eventual sale to other publishers.
Singleton said shoring up its balance sheet buys MediaNews more time to find a revenue model that can support long-term stability and leaves it better positioned to participate in the newspaper industry’s ongoing consolidation.
Speaking last September at the National Conference of Editorial Writers, Singleton noted that motives for newspaper ownership have shifted over the years, from those who wanted to cover news and write opinion to those who came to view newspapers as purely financial investments. Now banks are becoming "accidental" stockholders.
"I would submit that the next chapter will be ownership by those who want to own newspapers," Singleton said. "Count me in that group. The world will have come full circle."
MediaNews Group is the nation’s second-largest newspaper publisher by circulation, with 54 daily newspapers and more than 100-non-daily newspapers in 12 states. It also operates numerous websites, a television station in Alaska and several radio stations in Texas.
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