By Staff reports
DENVER (MNG) ? Affiliated Media Inc., the holding company for MediaNews Group, and its lenders have agreed on a plan that will significantly reduce the company”s $930 million in debt, the Denver-based company announced Friday.
The agreement swaps debt for equity, retains the current management team and excludes all of the company”s media properties, including Lake County Record-Bee, according to the announcement. Affiliated Media will be left with debt of just $165 million.
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. “For them it is business as usual,” he said.
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.
MediaNews is the controlling partner of the California Newspapers Partnership, which owns the Record-Bee and more than 30 other daily newspapers in the state. The operations of the Record-Bee will not be affected by the deal.
“This is a great outcome for Affiliated Media. The result is that there is no impact on California Newspapers Partnership,” Steve Rossi, CNP president and CEO, said. “Our advertising and circulation trends are improving, and are among the best in the industry. We are focused on excelling in content for our readers and Web site users, and in providing the best media value in our marketplaces for advertisers.”
Under the plan senior lenders, who are owed about $590 million, will obtain a majority of the equity in the reorganized company.
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 seven-member board, giving them control.
“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. 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. But the large number of bondholders, not all of whom could be located, made it necessary to take the plan into court, Singleton said.
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.
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 Web sites, a television station in Alaska and several radio stations in Texas.
