Philadelphia papers owner files for bankruptcy protection
NEW YORK (Reuters) - The publisher of The Philadelphia Inquirer and Daily News said on Sunday it filed for Chapter 11 bankruptcy protection, marking the latest milestone in a crumbling of the U.S. newspaper business.
In a statement, Philadelphia Newspapers LLC blamed its filing on a "rare trifecta of a dramatic decline in revenue, the worst economic crisis since the Great Depression and a debt structure out of line with current economic realities."
The announcement came a day after Journal Register Co, which publishes 20 daily newspapers, filed for Chapter 11 bankruptcy protection, as U.S. newspaper publishers stumble in a rising tide of debt and sinking ad sales.
Philadelphia Newspapers' chief executive, Brian Tierney, did not respond to an e-mailed request for comment. Inquirer Editor Bill Marimow declined to comment.
Philadelphia Newspapers and Journal Register, which publishes several small papers in the Philadelphia metropolitan area, join the much larger Tribune Co, publisher of the Chicago Tribune and Los Angeles Times, in a growing line of U.S. newspaper publishers seeking bankruptcy court protection to stay afloat while they restructure.
Philadelphia Newspapers said it will continue normal operations of its newspapers, magazines and online businesses. It said the filing was made in the U.S. Bankruptcy Court for the Eastern District of Pennsylvania.
It is seeking bankruptcy court approval of up to $25 million in debtor-in-possession (DIP) financing provided by various lenders through NewSpring Capital. The money will allow it to keep paying its workers, the company said.
"The Debtors filed these cases principally to restructure an overleveraged balance sheet, not to restructure leases, contracts or operational agreements," the company said in its filing.
The company projected 2009 adjusted EBITDA in excess of $25 million, down from about $36 million it generated in 2008.
The company's largest unsecured creditors include Royal Bank of Scotland, MCG Capital Corp, CIT Group Inc and the Virginia Retirement System, according to the filing.
The company said it has been negotiating with its lenders for the last 11 months. In that time, it said lenders including the Blackstone Group, Drinker Biddle and Akin Gump have billed it more than $13.4 million in interest penalties.
Its operations are "sound and profitable," it said in a statement.
This is a problem that newspaper publishers such as Lee Enterprises and McClatchy Co have. While they are profitable, they owe money they borrowed to buy companies and take other actions, often at a ratio to their cashflow that violates their lending agreements.
Some publishers, like Lee and McClatchy, have renegotiated their debt terms to buy more time.
The Philadelphia Inquirer and Daily News previously were owned by Knight Ridder Inc, one of the largest U.S. newspaper publishers. Smaller publisher McClatchy swallowed it up for more than $4 billion in 2006, and then sold off several Knight Ridder papers, including the Philadelphia ones. Continued...
