February 22, 2009 / 12:08 AM / 11 years ago

UPDATE 3-Journal Register Co seeks bankruptcy protection

* Journal Register Co seeks Chapter 11 bankruptcy

* Pre-negotiated reorganization plan with key creditors

* Newspaper publisher plans to restructure operations

By Emily Chasan and Robert MacMillan

NEW YORK, Feb 21 (Reuters) - Journal Register Co JRCO.PK sought Chapter 11 bankruptcy protection on Saturday, making it the latest U.S. newspaper company to buckle under deteriorating advertising revenue and debt that it cannot easily repay.

The company publishes 20 daily newspapers, including The New Haven Register and The Trentonian. It joins the ranks of the Minneapolis Star-Tribune, as well as Tribune Co, publisher of the Chicago Tribune and Los Angeles Times, and highlights the challenges U.S. newspapers face as advertisers flee their print editions and more people get their news for free online.

For years, Journal Register has been among the smallest of publicly traded U.S. newspaper publishers. Nevertheless, its filing will increase scrutiny on other U.S. newspaper publishers, including McClatchy Co (MNI.N) and Lee Enterprises (LEE.N), which are trying to survive a severe ad downturn without running afoul of their creditors.

Journal Register has already agreed with key creditors on a pre-negotiated reorganization plan, and said it was planning to restructure its operations.

A pre-negotiated bankruptcy allows companies to move more quickly through the court process because they have agreed on major issues with groups of creditors. The company plans to solicit votes quickly from other creditors on its bankruptcy reorganization plan, according to court papers.

The Yardley, Pennsylvania-based company said advertising revenue had been driven lower by the housing downturn, declining automotive sales, the retail sector slowdown, a slow labor market that has hurt employment classifieds and a shift to online media, according to court papers filed in the U.S. Bankruptcy Court in Manhattan.

Journal Register’s revenue declined by 2 percent in 2006, 8.5 percent in 2007 and was down 10 percent in the period from January 2008 through November 2008.

The company has about $692 million of debt, it said in court papers. It listed assets of about $596 million and liabilities of about $737 million in court papers.

The company has about 3,465 employees and also owns 159 non-daily newspapers, it said in court papers. Under its proposed reorganization plan, the company said it planned to cancel its common stock.

Journal Register is the leftover company from the former newspaper publishing empire owned by Ralph Ingersoll II in the 1980s. The company nearly went bankrupt late in that decade after bingeing on junk bonds to finance acquisitions and then being unable to pay its debt.

In the late 1980s, it embarked on an ill-fated effort to start a rival daily paper to the St. Louis Post-Dispatch, which was then owned by Pulitzer Inc and now is part of Lee. The paper folded in less than a year.

The company had begun expanding earlier in the decade under late Chief Executive Robert Jelenic, who kept a close watch over expenses. According to some media reports, Jelenic personally took mileage readings on company cars to make sure his employees were not claiming too much money in expenses.

In 2004, the company spent $415 million to buy several papers in Michigan, only to see unemployment rise and the local economy fall apart. Many analysts in recent years said that would prove to be a huge mistake.

Soon afterward, newspaper advertising revenue took a nosedive, leaving more publishers dangerously close to not being able to honor their debt terms. Journal Register eventually was delisted and began restructuring proceedings, including laying off employees and selling off papers.

The company has retained law firm Willkie, Farr & Gallagher LLP as legal counsel, Lazard Freres & Co as investment banker and Conway, Del Genio, Gries & Co as restructuring adviser, it said in court papers.

Lazard also is advising Tribune Co, which filed for bankruptcy after being unable to meet the terms of some $13 billion in debt it took on in a buyout led by real estate magnate Sam Zell.

The case is In re: Journal Register Co., U.S. Bankruptcy Court, Southern District of New York, No. 09-10769. (Reporting by Emily Chasan and Robert MacMillan; Editing by Peter Cooney)

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