The holding company of MediaNews Group Inc., which owns 54 daily newspapers, along with television and radio broadcasters, plans to file Chapter 11 bankruptcy after getting hit hard by the lagging advertising revenue that sent their balance sheet into a tailspin.
MediaNews said its holding company will file a "prepackaged" bankruptcy...Under MediaNews's plan, senior lenders will swap debt for equity, helping reduce the company's debt load from about $930 million to $165 million. Bondholders will get warrants for possible future equity.
Hearst Corp., another owner of many magazines and newspapers, has at least $400 million in equity and debt invested in MediaNews. That investment is expected to be completely wiped out during the Chapter 11 bankruptcy. And with MediaNews being the seventh newspaper company to go bankrupt in the last year, it seems that the financial problems plaguing this industry are epidemic.
William Dean Singleton, MediaNews' chairman and chief executive, who will take control of the company after it emerges Chapter 11 bankruptcy, made an interesting comment about choosing to file Chapter 11 bankruptcy:
"It was personally difficult for me," Mr. Singleton said in an interview. "I'm a ranch kid from West Texas, and we don't like the B-word." He said the company tried for months to rework its debt load outside of bankruptcy court.
I find it a little disingenuous to refer to bankruptcy as the "B-word" while at the same time positioning yourself to take full advantage of the bankruptcy process. Bankruptcy is not a bad word or dirty thing that needs to be referred to with code language. Bankruptcy is a powerful process for discharging and/or restructuring debt so that indebted individuals and businesses can survive and thrive despite previous mistakes or crises. If it was not for the bankruptcy process, the entire newspaper industry (along with the auto industry) might have collapsed by now. That's the truth! Bankruptcy allowed these suffering industries to get a second chance at survival and that fact should be stated clearly.