Affiliated Media Inc, the holding company for MediaNews Group Inc newspapers including, The Denver Post and San Jose Mercury News, said on Friday that it plans become the latest owner of US newspapers to file for bankruptcy.
The company said it would file a "prepackaged" plan already approved by lenders, which should allow it to emerge from bankruptcy more quickly. A date for the filing hasn't been announced, but the company said it would be in the near future. The reorganization plan was expected to be filed in federal bankruptcy court in Delaware.
It would be at least the 13th bankruptcy filing by a US newspaper publisher in the past 13 months. The owners of dozens of newspapers have been pushed into bankruptcy protection as the recession and competition from the Internet have sapped advertising revenue.
MediaNews' management and newspaper operations, employees and vendors won't be affected by the holding company's restructuring, MediaNews Group Chairman and CEO William Dean Singleton said. He is the chairman of The Associated Press board of directors. A spokesman for Hearst declined to comment on Friday. Affiliated Media's bankruptcy filing illustrates the uncertainty facing major newspapers publishers as their main source of income, print advertising, has plunged during the past four years. Since 2005, the industry's annual ad sales have dropped by more than $20 billion, a decline of about 40 percent, based on figures from the Newspaper Association of America.
Publishers are hoping the slump will ease this year as the economy recovers from the worst recession in 70 years. But newspapers still must figure out how to support their operations as more readers and advertisers migrate to the Internet, where ads sell for dramatically less, many news articles are free, and the competition is much greater.
Mass layoffs and other cost-cutting efforts have helped keep most publishers, but those loaded down with debt like Affiliated Media can't afford to shoulder the financial burdens that they took on during better times.
Newspapers' advertising and subscription revenues have been hurt with the rise of online sites that let people read news and advertise for free online. Singleton said Affiliated Media's restructuring would give the company "breathing space" to create a new business model for media.
Under the MediaNews bankruptcy plan, company debt would fall from about $930 million to $165 million. Senior lenders would swap debt for stock, the company said. The group of 116 lenders led by Bank of America would hold a majority of stock but not voting control. Singleton said the company has enough cash to fund its operations.
The Hearst Corp, and the family of MediaNews co-founder Richard Scudder are giving up interests in MediaNews, according to a person who had knowledge of the plan but spoke on condition of anonymity because he did not want discuss the plan publicly. Singleton and Scudder founded MediaNews in 1985. The company now owns 54 daily newspapers, including St. Paul Pioneer Press and The Salt Lake Tribune, as well as more than 100 non-daily newspapers, Web sites, television and radio broadcasters.