MediaNews holding company restructures debt
Editor’s note: MediaNews Group owns The Park Record.
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.
"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."
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.
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.
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