Another Big Newspaper Company Going Into Chapter 11

The environment seems to be getting a little bit better for the newspaper industry. There are signs that the remarkable drop in advertising which has lasted for more than two years is slowing. Several newspaper operations, including The Tribune Company and Journal Register, filed for Chapter 11. But since those filings, stock values for the largest newspaper chains, including The New York Times Company (NYT) and Gannett (GCI) have moved up sharply.The holding company for MediaNews Group, one of the largest newspaper publishers in the U.S., said it would go through a prepackaged bankruptcy to eliminate most of its debt. The transaction would mean that Affiliated Media's debt obligations would drop from $930 million to $165 million. Most creditors will swap their debt for equity. Long-time newspaper executive and MediaNews CEO Dean Singleton will continue to hold a stake in the corporation. According to the Associated Press, the company said it has enough money to fund its operations going forward. MediaNews owns several large papers, including the The Denver Post and the San Jose (Calif.) Mercury News.

For the last two years, the recession and the Internet, particularly sites like Craigslist which offer free classified ads, have been the greatest enemies of newspapers, but the MediaNews bankruptcy shows that going forward, it will be debt that bedevils the industry. Heavyweights including The New York Times Company and McClatchy (MNI) face repayment of large chunks of debt in next two to four years, most of it debt that they took on when they bought other newspapers. That means that members of the current management teams may not be around long, and that some banks and private-equity firms will take large write-offs. Not all creditors will be as generous about retaining their debtors' old-guard executives as MediaNews's were.

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