Debt troubles push two publishers to edge

AMERICAN newspapers are having another bad week. Last night, the Philadelphia Inquirer filed for Chapter 11 bankruptcy protection less than 24 hours after the Journal Register took similar action.

The Journal’s stock will be cancelled and it will be owned by its lenders under a proposed reorganisation plan that was filed in a New York bankruptcy court. Bloomberg reports that it owes $1 billion with assets of between $100 million and $500 million.

The company employs more than 3,500 staff and its stock has been trading at less than 1c. It has eight dailies and 18 non-dailies.

Philadelphia Inquirer CEO Brian Tierney... debt, not operating revenue, the problem

Philadelphia Inquirer CEO Brian Tierney... debt, not operating revenue, the problem

The Philly Inquirer is in much the same position, according to its court documents, which said the value of the company was “almost certainly far less than the amount of the outstanding debt”.

One investor was quoted by Bloomberg as saying that its investors would likely lose “everything”.
The Inquirer became known around the world for being rescued by a clutch of enthusiastic, local millionaires who did not want to see their city newspaper die. They were brought together by marketer and PR professional Brian Tierney, who was speaker at PANPA 08.

After buying the Inquirer from McClatchy Co., the group brought together the Inquirer and the Daily News in May 2006 to produce a single newspaper for their city.
Mr Tierney told staff in a memo that revenue losses due to the recession was “squeezing our operating profit” and this was now “insufficient to service our debt load”.  The memo indicates that the newspaper has continued to profitably innovate and, like so many American newspapers, it is not the newspaper but the company and its debt structures that is having the most damaging problem.

He told US reporters in a separate statement that “this restructuring is focused solely on our [$390 million] debt, not our operations. Our operations are sound and profitable.”

Before this move, the paper had cut jobs across the newspaper, including 68 in the newsroom. It then had to take a second action, taking out another 10 percent from its staff costs.

This comes against the backdrop of a report from the North American Newspaper Association that said advertising fell by its greatest percentage in 37 years in the quarter ending December 08.

The New York Times has been not immune from the troubles. It stated overnight that it will not pay a quarterly dividend to help reduce its own debt levels. This follows similar decisions made by Media General and McClatchy, two other large American newspaper publishers.

McClatchy famously paid US$4.1 billion in less than three years ago for a 12-newspaper-chain owned by Knight Ridder. The Inquirer was one of those titles.

See earlier stories on the financial results reported by Fairfax Media yesterday.

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