April 10, 2011

Facing Default, Publisher Lee Enterprises Sells 'Junk' to Foil Distressed Investors

Matt Wirz:

Newspaper chain Lee Enterprises Inc. is on the verge of saving itself from bankruptcy--and many of its debt holders are livid.

Lee, weighed down by about $1 billion of debt, has long been high on the list of potential bankruptcies. But thanks to the roaring market for debt of risky companies, Lee is preparing to sell junk bonds that would enable it to pay off its obligations and give it a new shot at survival.

But what is good news for the company has thwarted the plans of a flock of "vulture" investors--Monarch Alternative Capital, Alden Global Capital, Marblegate Asset Management and a unit of Goldman Sachs Group Inc.--which have been buying Lee's loans. The group had been betting the company would default, and that they could turn their holdings into an ownership stake, giving them access to the company's assets, which include St. Louis Post Dispatch and the Arizona Daily Star newspapers.

.....

Lee incurred much of its debt in 2005 when it paid top-dollar to buy Pulitzer Inc., a chain of 14 newspapers including the St. Louis Post-Dispatch. The combined company would have been a particularly valued prize because, unlike many of the other publishers that went bankrupt in recent years, the company generates over $100 million of free cash flow despite its debt load. The publisher's focus--running small and midsize papers and keeping a rein on costs--has insulated it from the worst of the decline in subscriptions and advertising affecting newspapers in metropolitan markets.

Lee owns half of Capital Newspapers, publisher of the Wisconsin State Journal.

Posted by jez at April 10, 2011 9:14 PM | Subscribe to this site via RSS:
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