The owner of the Hockessin Community News and Dover Post has emerged from a “prepackaged” Chapter 11 bankruptcy filing in Delaware that better manages a debt load that far exceeds its assets.
GateHouse Media filed on Sept. 27, with the unanimous support of its existing lenders to restructure $1.2 billion of debt that was scheduled to come due in August 2014. Assets were listed at less than half a billion dollars.
Click here for previous story on the filing. Other Gatehouse publications and websites include the Middletown Transcript, Milford Beacon, Sussex Post, Smyrna-Clayton Sun Times and the Sussex Countian.
GateHouse is now owned by New Media Investment Group, and is under common ownership with Local Media Group, a company with eight daily community newspapers and 13 weeklies. Local Media was spun off from media giant Fox, which had earlier acquired Dow Jones, owner of the Wall Street Journal and Local Media. Holding a large stake in Gatehouse over the years is equity (hedge) fund Fortress Investment Group, which also controls Local Media.
GateHouse acquired the Dover Post Co. and other community newspaper companies in the Internet era, piling up debt on the theory that smaller towns would not be as affected by online reading and advertising pressures as big city papers. Funds, such as Fortress, hoped to cash out on investments by taking the company public or selling to a larger company.
A similar roll-up strategy was at work at privately held American Consolidated Media, which until recently was headed by a former GateHouse executive. American Consolidated owns the Newark Post, and the Cecil Whig and Star Democrat in Maryland.
However, businesses in smaller communities also cut back on print display and classified advertising, with the trend accelerating during the recession of 2009.
GateHouse was left with a large debt load and lower revenues. Newspapers of all sizes have cut staff and taken other steps to deal with the lower revenues. However, cuts have typically been deeper for debt-laden companies like GateHouse and American Consolidated.
“GateHouse’s plan effected a ‘balance-sheet restructuring’ and allowed GateHouse to emerge from bankruptcy with much less debt on its balance sheet and with its business operations completely intact,” CEO Michael Reed stated. “Joining with Local Media Group is an important step in growing the GateHouse business and will contribute to GateHouse’s future success as the pre-eminent source for locally focused content, covering and serving our subscribers, advertisers and customers through print, online and other digital products, including mobile applications.”
Media reports have suggested that GateHouse will be looking for papers and digital sites to acquire.
GateHouse’s secured lenders, whose debt was cancelled under the plan, received, at their election, shares in New Media or a 40 percent cash distribution.
Publicly traded shares of GateHouse have been cancelled, with the holders of those shares receiving warrants for New Media stock. Houlihan Lokey Capital acted as financial advisor to GateHouse.and The Wilmington law firm Young Conaway Stargatt and Taylor served as legal counsel.
