February 19, 2009 / 11:07 PM / 11 years ago

UPDATE 2-Lee refinances debt, amends bank credit agreement

* Amends bank principal payments to weather recession

* Cuts payments on bank credit agreement

* Initiates cost reduction measures

(Updates with background, share price, adds dateline)

NEW YORK Feb 19 (Reuters) - Newspaper publisher Lee Enterprises Inc (LEE.N) said on Thursday it agreed with lenders on refinancing and restructuring about $1.4 billion in debt and financing arrangements.

The deal brings to an end months of negotiations between the company and its lenders, as the publisher of the St. Louis Post-Dispatch, worked to avoid a “technical default” on its loans.

The shares of the company, which publishes 49 daily newspapers and hundreds of weekly and specialty publications, jumped more than 18 percent in after hours trading after the company disclosed the agreement.

Lee said it repaid $120 million of principal on $306 million of debt of its subsidiary, St. Louis Post-Dispatch LLC, and refinanced the remaining debt. It also restructured future payments under its $1.1 billion bank financing arrangements.

U.S. newspapers are grappling with steep declines in advertising revenue and a shift in the habits of readers as they move from printed newspapers to free online editions. In the last few months, several newspaper publishers, including Chicago Tribune publisher Tribune Co TRBCQ.PK and The Minneapolis Star Tribune have been forced to seek bankruptcy protection.

“Negotiations were complicated for both Lee and our lenders because of the combination of the extremely challenging credit environment and poor economic conditions,” Chief Financial Officer Carl Schmidt said.

“As a result of these actions, we have significantly improved our liquidity for the foreseeable future.”

Lee said that, under the deal, it reduced its remaining payments on the bank credit agreement for 2009 by more than 50 percent to $22.1 million. It also reduced its fiscal 2010 agreement to $77.8 million from $166.3 million and its fiscal 2011 agreement to $65 million from $261.3 million.

The company also said it had initiated “a broad range of cost reductions” expected to cut 2009 costs by 11 percent to 12 percent, including long-term streamlining initiatives.

Lee said it incurred about $20 million of financing costs from the deal, including professional and advisory fees.

The Davenport, Iowa-based company’s shares, which have lost more than 97 percent of their value in the past year, closed at 33 cents on Thursday on the New York Stock Exchange. In after hours trading, they rose to 39 cents a share.

For the alerts, please double-click [ID:nWNAB4803] (Reporting by Emily Chasan in New York and Santosh Nadgir in Bangalore)

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