Posted on 06/06/2008 4:39:12 AM PDT by abb
The owner of The Philadelphia Inquirer and Daily News has missed a June 1 interest payment on $85 million of loans and is in talks with lenders for relief, according to a report released Thursday by a debt ratings agency.
Philadelphia Media Holdings LLC did not maintain the necessary senior debt-to-cash flow ratio -- which can happen when cash flow shrinks -- required by its senior lenders, according to Standard and Poor's Leveraged Commentary and Data unit.
As a result, senior lenders blocked the company's interest payments to $85 million in junior loans held by another group of lenders. That's because senior lenders, who hold at least $295 million in loans, want to preserve the company's cash for repayment of its own loans.
Philadelphia Media Holdings is in talks with senior lenders to obtain a two-year relief from the required debt-to-cash flow ratio, which is a measure of a company's financial health. However, the company likely will end up paying a higher interest rate on its loans as result, said Chris Donnelly, an S&P vice president.
As for its junior debt, the company is in talks to pay the interest in kind instead of cash.
Donnelly said it means the interest payment will be added to the principal loan amount of $85 million. However, that means future interest payments will be higher because of a bigger principal.
"This is a pretty serious situation," he said. "The company is struggling."
Philadelphia Media Holdings is also seeking an equity infusion of about $8 million.
A group of investors led by former advertising executive Brian Tierney bought the two papers for $562 million in June 2006 from McClatchy Co.
A call to the company was not immediately returned.
(Excerpt) Read more at businessweek.com ...
http://www.editorandpublisher.com/eandp/news/article_display.jsp?vnu_content_id=1003813173
‘Serious Situation’: Owner of 2 Philly Dailies Misses Loan Payment
Published: June 05, 2008 10:55 PM ET
PHILADELPHIA The owner of The Philadelphia Inquirer and Daily News has missed a June 1 interest payment on $85 million of loans and is in talks with lenders for relief, according to a report released Thursday by a debt ratings agency.
Philadelphia Media Holdings LLC did not maintain the necessary senior debt-to-cash flow ratio — which can happen when cash flow shrinks — required by its senior lenders, according to Standard and Poor’s Leveraged Commentary and Data unit.
As a result, senior lenders blocked the company’s interest payments to $85 million in junior loans held by another group of lenders. That’s because senior lenders, who hold at least $295 million in loans, want to preserve the company’s cash for repayment of its own loans.
Philadelphia Media Holdings is in talks with senior lenders to obtain a two-year relief from the required debt-to-cash flow ratio, which is a measure of a company’s financial health. However, the company likely will end up paying a higher interest rate on its loans as result, said Chris Donnelly, an S&P vice president.
As for its junior debt, the company is in talks to pay the interest in kind instead of cash.
Donnelly said it means the interest payment will be added to the principal loan amount of $85 million. However, that means future interest payments will be higher because of a bigger principal.
“This is a pretty serious situation,” he said. “The company is struggling.”
Philadelphia Media Holdings is also seeking an equity infusion of about $8 million.
A group of investors led by former advertising executive Brian Tierney bought the two papers for $562 million in June 2006 from McClatchy Co.
A call to the company was not immediately returned.
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Meredith Cuts 60 Jobs
About 20 layoffs come from magazines; publisher attributes to down ad revenues.
Joanna Pettas FolioMag.com
06/05/2008
Meredith Corporation has become the latest magazine publisher to reduce its workforce, today cutting 60 jobs and opting not to fill 60 open positions. Twenty of the layoffs come from its magazine business, a Meredith spokesperson tells FOLIO:.
The layoffs are “very selective,” according to the spokesperson, and include staffers in editorial, sales, production, digital imaging and other areas.
About a third of the eliminated positions are from Meredith’s book division while the other third are from its broadcasting division. The 60 open positions being eliminated are company-wide, the spokesperson says.
Meredith attributes the cuts to soft retail sales, noting also that fiscal fourth quarter 2008 advertising revenues are down about 15 percent from the same quarter in 2007.
The layoffs were announced as part of a release about the publisher’s acquisition of Big Communications, a Ferndale, Michigan-based pharmaceutical and biotech marketing firm. Big Communications will operate as a division of Meredith Integrated Marketing, the company’s custom marketing unit.
According to the spokesperson, the acquisition helps Meredith increase non-advertising sources of revenue and opens a new area for the company in the b-to-b space. Terms of the deal were not disclosed.
Earlier this week, Reed Business Information eliminated 41 positions [0] company-wide as part of a restructuring effort.
Read the Story and Comment Now Online:
http://foliomag.com/2008/meredith-cuts-60-jobs
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But he is confident the lenders will not try to seize his newspapers?
The don’t want to do that. There’s no ‘there’ there. Book value (property, plant and equipment) is probably way less than the amount of the mortgage. They’ll have to squeeze the money out of cash flow - that is if they can keep it afloat long enough.
It was stupid for both the borrower and lender to do this deal in the first place. Going in hock to buy a business in a shrinking industry ain’t real smart.
I could have told them that two years ago, but they didn’t ask me.
If anyone wants to ask me, I will tell them to just go right ahead and sink your money into liberal papers. Yes sir, just jump right in and bet the farm.
It is obvious their business model has failed. It is obvious why it has failed and it is because people are simply sick and tired of being told WHAT to think and believe and HOW they should feel about this or that. Yet the media insists on doing MORE of what is destroying them instead of correcting their problems and reversing the slide by doing less.
Simply sticking to reporting the news as it occurs and HOW it occurs would help them, but their blind ideology will never let them do this. In the end they will go the way of everything that fails the test of Natural selection, the rule of which says adapt or die.
I can just see it now as it unfolds in the banker's office..... "We propose to pay you with 100,000 words instead of cash. They are golden words saved in our vault for just such an occassion. How about it? words rather than $$" .
Tierney has been reported to be a Republican.
This situation is akin to the struggling networks who compete to be least journalistic left-wing organization.
Tierney made no changes to the left-wing rag.
If you want to read a real newspaper in Philadelphia, read The Bulletin.
“A call to the company was not immediately returned.” Phone service disconnected for non-payment.
Your point is well taken, but there's an alternative explanation that does not involve insanity. It can be expressed by syllogism:
I'm smarter than everyone else, therefore...
I'm smarter than the other people who run newspapers, therefore...
I'm smarter than the other people who's left-leaning newspapers are going down the tubes, therefore...
Toss another million on the barbie, mate!
Exactly. Tierney is a Republican. When Tierney and his group bought the liberal papers, to placate the unions, editors, corrupt Philly government, etc. he went out of his way to take a "pledge" that he would not interfere with the editorial aspects of the papers.
I said it at the time, that was a DUMB move. The papers were left wing (Inquirer) and even more left wing (Daily News).
How could an owner of ANYTHING pledge to have no control of his product? Doomed from the start.
At the time Tiereny and his group were buying the papers, another guy, billionaire Democrat sugar daddy Ron Burkle was considering buying the papers - he would have surely taken no such pledge - and he wouldn't have been asked to either since the editorial board was already left wing enough for him.
Personally, I would not pay a dime for either paper. I occasionally read one of them when I visit my parents' house. As long as they have all left wing columnists like Dick Polman and Will Bunch and token "conservatives" like Michael Smerconish, I have no interest in their papers.
If the Inquirer is Dick Durbin, the Daily News is Dennis Kucinich.
Default in paying your bonds? That means you are BANKRUPT!!! The two biggest socialist rags west of NYC (and east of Baltimore) may be on the brink! Happy day...
The Minneapolis (Red) Star Tribune is said to be on the verge of defaulting also. Who said there’s only bad news out there?
http://www.nypost.com/seven/06022008/business/avista_faces_debt_squeeze_at_star_tribun_113551.htm
AVISTA FACES DEBT SQUEEZE AT STAR TRIBUNE
Perhaps you are correct. It is like the business man who sells his product at a loss but hopes to make it up in volume.
Twelve years ago I tried to convince the president of a top-rated, very successful network O&O station that he needed presence on the internet, now.
His sneering derision at my suggestion that the net posed any threat to his business still makes me smile.
He's now head of the 3rd rated station in town, losing money hand over fist.
cash flow problems ?
oops
"By the end of this decade or shortly thereafter, television networks as we know them today will cease to exist. They will be just another url on the world wide web competing against millions of others."
"Network evening newscasts will go dark after the '08 elections and their news divisions disbanded."
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