The San Francisco Press Club and PR Newswire reported that MediaNews Group Inc., using the name of Affiliates Media, Inc., a holding company that had not been disclosed previously, announced it would seek protection from the federal courts from creditors, including Hearst Corp., owner of the San Francisco Chronicle.
Under the so-called "prepackaged bankruptcy" filing, according to the reports, the percentage of the company controlled by William Dean Singleton, its chairman and chief executive officer, will double from 10 percent to 20 percent. However, Hearst Corp., owner of the Chronicle, will apparently lose its share in the 54-newspaper chain, along with Singleton's longtime partner, Richard Scudder, 96, of New Jersey.
The Wall Street Journal reported that MediaNews had been teetering for months and, according to Singleton, had been trying to rework its debt load instead of filing for Chapter 11 bankruptcy.
"It was personally difficult for me," Singleton told the Journal. "I'm a ranch kid from West Texas, and we don't like the 'B word.'"
The Journal said that Singleton's ability to retain control over MediaNews "represents a face-saving victory in the company's restructuring."
Singleton said that once the bankruptcy is over, he plans to lead an industrywide consolidation. Asked which newspapers or groups of newspapers might be combined, Mr. Singleton answered: "You can look at the map."
Unlike other media company reorganizations, this one reportedly does not involve the newspaper operations or have any effect on employees or vendors of the newspapers. Only the holding company will restructure.
Singleton said the company has enough cash to fund its operations.
"In our search for a new model that reflects the realities of today's changing newspaper environment, we have come up with a solution that restores financial strength and flexibility to our balance sheet," Singleton said.
Singleton said the newspaper industry is undergoing a major transformation, exacerbated by the current recession, which is causing falling advertising, a slumping retail market and significant drops in classified advertising. About 80 percent of Media News' revenues are generated by advertising sales, and those sales will likely continue to be affected by the economic downturn, he added.
The company is current on all vendor payments, he said, and expects to remain so. He said the company has adequate cash to fund all its operations in a normal fashion.
According to the PR Newswire report, senior lenders to the company are owed approximately $590 million, guaranteed by certain affiliates. The company also owes an aggregate principal amount of about $326 million to holders of subordinated notes.
Singleton said that even as the daily newspaper environment has badly deteriorated over the past three years, MediaNews newspapers have performed better than the industry as a whole.
Circulation of the company's newspapers grew for the September Audit Bureau of Circulations six-month reporting period, while industry circulation dropped 10.6 percent, he said.
"This reorganization does not come without pain," Singleton said. "Current shareholders will be losing the value of their holdings. But we believe that adopting this plan will give us a far better platform from which to develop, grow and participate in the consolidation and re-invention of the newspaper industry."
The owners of dozens of daily newspapers have been pushed into bankruptcy protection as the recession and competition from the Internet have sapped their advertising revenue.
The decline in advertising revenue has been particularly harsh on the dailies, publishers say, because they have been much more dependent than weekly newspapers on classified, automobile, employment and large chain store advertising. Much of that has migrated to online sites or just disappeared because of store mergers, closings and other factors.
Just this week, the Sacramento Bee announced that it will eliminate 25 jobs due to a "prolonged period of revenue declines." The number of newsroom jobs to be cut wasn't released.
It's the fourth round of layoffs at the 248,000-circulation daily in the last 18 months. In a statement, executives with McClatchy said they hope to get enough volunteers to take voluntary buyouts to avoid layoffs. The cuts will take place Jan. 29. They said the decline in advertising revenue is easing, but hasn't ended.