The owner of several Delaware newspapers and websites has filed for a “prepackaged” Chapter 11 bankruptcy in Delaware that aims to reduce the burden of more than $1 billion in debt.
GateHouse Media, Inc., one of the largest publishers of locally based print and online media in the United States, filed for Chapter 11 and requested confirmation of a joint prepackaged plan of reorganization.
Such Chapter 11 filings are used to make certain that a few creditors do not derail a refinancing package.
Gatehouse, which acquired Dover Post Co. papers and websites several years ago, piled up a large amount of debt in a wave of acquisitions of smaller daily and weekly newspapers.
At the same time, a recession and the loss of advertising revenue put financial pressure on the company. Papers and websites in Delaware include the Dover Post, Hockessin Community News, Middletown Transcript, Milford Beacon, Smyrna-Clayton Sun Times and Sussex Countian.
Gains from online revenues have not been able to make up for the print losses. Interest expenses led to a loss from continuing operations of $30.6 million for the first six months of this year on revenues of $230.2 million.
GateHouse announced on September 11 it had entered into an agreement under its 2007 secured credit facility, including certain affiliates of GateHouse, which contemplated a restructuring of approximately $1.2 billion of debt scheduled to come due in August 2014.
According to Michael Reed, CEO, the bankruptcy filing was a strategic decision and was not a reflection of any operational problems.
“We have complied with and are current with all our obligations,” he said, “but with the challenges facing our industry and the impending maturity of our secured debt next year, we needed to be proactive in exploring options to restructure our debt, recapitalize, and position ourselves for future growth. The prepackaged plan proposes a ‘balance-sheet restructuring,’ by which GateHouse will emerge from bankruptcy with much less debt on its balance sheet, but with its business operations completely intact.”
The company took pains to emphasize that 79 out of 80 holders of secured debt went along with its plan and no creditor voted to reject the plan.
GateHouse’s common stock would be canceled under the plan, and holders of secured debt would have the option of receiving a cash distribution equal to 40% of their claims, or stock in New Media Investment Group Inc., a new holding company that will own GateHouse and Local Media Group. Gatehouse stock was selling at 4 cents a share on Friday.
Houlihan Lokey Capital Inc. is acting as financial advisor to GateHouse, and Young Conaway Stargatt & Taylor, LLP, Wilmington, is acting as its legal counsel.
