Saturday, January 16, 2010

MediaNews: No layoffs in bankruptcy, but...

Although no one at MediaNews Group will be laid off because of the upcoming bankruptcy of the parent company, employees were told there are no guarantees that there won’t be staff cuts in the future.

“Our decisions about staffing have always been – and will continue to be – in response to business conditions, not our finances,” said a question-and-answer sheet distributed internally after MediaNews announced that it intends to shed some $765 million in debt by reorganizing under Chapter 11 of the bankruptcy code.

The company said bankruptcy would not result in layoffs, but pointedly declined to rule out future cuts. “While there is no guarantee that advertising or circulation won’t deteriorate further and force us to adjust accordingly, there are no layoffs planned as a result of our financial restructuring, ” said the handout.

Affiliated Media, the parent company of MediaNews Group, said late Friday that it planned to file for bankruptcy to eliminate all but $165 million of its $930 million in debt.

A press release issued late on the eve of a three-day weekend said the company’s lenders agreed to a prepackaged bankruptcy that would give them 80% of the equity of the company, with Chief Executive Officer William Dean Singleton and President Jody Lodovic owning 20% of the business and controlling the company’s board.

Privately held Media News is the second largest newspaper chain by circulation in the United States, operating 54 dailies and more than 100 non-daily publications in 12 states.

The MediaNews announcement followed by only a day the news that Morris Publishing Group is taking a similar approach to dispensing with $278 million in debt that it cannot pay.

Morris, which operates 13 newspapers in the Southeast, said it planned to gain approval of a federal bankruptcy court for a prepackaged plan that would give its lenders equity in a reorganized company.

A prepackaged bankruptcy refers to a case in which the creditors being wiped out agree prior to filing to a reorganization that gives them a continuing interest in the business.

The two upcoming filings will bring to nine the number of newspaper publishers that have been forced to file for bankruptcy because they inauspiciously took on unsustainable debt in advance of the fiercest decline in newspaper advertising in history.

The publishers preceding the class of 2010 in bankruptcy court are Freedom Communications, Heartland Publications, Journal Register Co., Minneapolis Star Tribune, Philadelphia Newspapers LLC, Sun-Times Media Group and, the biggest of them all at $13 billion, Tribune Co.


Anonymous Anonymous said...

I would not be as concerned with more layoffs (which would seem a certainty), but newspaper closures. Billy Dean is notorious in the industry for running his papers on a shoestring, and several are speculated to be running in the red. I think BANG is about to go POOF, and the WSJ story casts questions in my mid about the Pioneer Press. He's going to do everything he can to keep his hard-fought-for Denver monopoly, but several other papers are questionable.

11:04 AM  
Blogger Steve Ross said...

With so few employees -- and so few making a living wage -- why would firing any of them make much of a difference anyway?

7:01 PM  
Anonymous Anonymous said...

So screw the shareholders...then screw the banks..yet maintain control of the operations of the Company? I don't get it. There are plenty of talented newspaper executives available who could do a much better job for their financial partners that Mssrs. Singleton and Morris.

7:32 AM  
Anonymous Anonymous said...

The extreme irony here is that Singleton, always the most leveraged newspaper guy on the block, has managed to cleverly shed his debts and, by doing so, position himself to take control of other newspaper groups that haven't been able to do so as quickly as he. Lenders need operators and the lenders of other newspaper groups will now look to Singleton as an operator who can consolidate multiple newspaper groups and maximize profitability. Think of Dean as Mad Max, the last man standing in a barren landscape.

8:42 AM  
Anonymous Anonymous said...

I am very confused by this deal. Namely, what would be in it for me if I were a debt-holder? From the press release, I would now get stock in a new reorganized company. But they will be class B stock with Billy Dean retaining control of class A and control of the board of directors. There is no indication these stocks will be publicly traded, so how would I price them? Also, the press release says that all but one of the newspapers is "profitable," whatever that might mean. But how profitable? The $930 million in current debt is far less than I speculated, and about half of McClatchy which also is choking on its debt. Let's assume the debt carries a 10 percent interest rate, which would be in line with a troubled company. That's $93 million in annual debt payments, which is not much for all of those newspapers. That would indicate the papers are barely "profitable." I look forward to reading the bankruptcy filings on this, because they should throw light on both this deal and this most murky company.

7:31 AM  
Anonymous james o. clifford said...

The important part of newspaper is NEWS, not PAPER. I fear the news will go with newspapers. We are witnessing the end of the beat reporter. Blogs will never fill the gap. The AP gets most of its news from newspapers. That's why insiders say AP stands for After Publication. The real iceberg for journalism was hit decades ago when UPI was allowed to drown, giving AP a near monopoly on news gathering and distribution.

1:31 PM  
Anonymous Anonymous said...

UPI didn't drown, but is still alive, although barely. The chief beneficiary of UPI's decline was Reuters, which is thriving. Also Bloomberg has appeared as an AP rival. There are plenty of rivals to AP for distribution.

6:12 PM  
Anonymous Mark said...

Add CanWest to your list of newspaper bankruptcies to bring it up to an even 10 (four in the last 30 days).

8:54 AM  

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