Media News files for bankruptcy protection to undergo financial restructuring

Move has no effect on newspaper operations/employees, publisher says

The publisher of the Contra Costa Times, Tri-Valley Herald, San Jose Mercury News and 51 other daily newspapers in the Bay Area and other parts of the country, is filing for bankruptcy protection.

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.

The announcement was also made over the weekend in various newspapers under Media News control.

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.

Scudder was previously chairman of MediaNews. Now Singleton is both chairman and CEO, as well as CEO of the Associated Press organization, which also posted the bankruptcy filing story.

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."

The MediaNews chain owns most of the paid-circulation dailies in the Bay Area including the Herald, Times, Mercury News, Oakland Tribune, Marin Independent Journal, San Mateo County Times and the Daily News in Palo Alto.

In its statement issued through PR Newswire, a commercial news and information distribution service, Affiliated Media, Inc. said it has obtained the approval of its lenders for the financial restructuring of the company that will sharply reduce its debt, boost its cash flow and allow greater financial flexibility. The plan will be implemented in the near future through the "prepackaged" chapter 11 filing.

Affiliated Media, Inc. is the holding company for the MediaNews Group family of newspapers, the nation's second-largest newspaper publisher by circulation and owner of 54 daily newspapers, over 100 non-daily newspapers, as well as websites, television and radio broadcasters that serve markets in 12 states.

Unlike other media company reorganizations, Singleton said this one does not involve the newspaper operations or have any effect on employees or vendors of the newspapers. Only the holding company will restructure.

The reorganization, structured in consultation with the company's senior lenders, Affiliated Media said, provides for a swap by senior lenders of debt for stock, allowing debt to fall from about $930 million to $165 million. The group of 116 lenders led by Bank of America would hold a majority of stock but not voting control.

Management led by Singleton would retain 20 per cent of the company through stock and warrants. Singleton and company President Joseph J. Lodovic IV will own all class A shares, allowing them to choose a majority of the seven-member board of directors. Other stockholders will own class B and C shares.

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.

"It does not affect the operations of any of our newspapers or vendors or other operations," he explained. "It gives us one of the strongest balance sheets in the industry. It gives us breathing space to create a new model for the newspapers we publish."

He added: "One critical advantage of our plan, compared with those by some other media companies, is that it is a prepackaged plan that has the approval of lenders and unlike other filings, this one does not involve our newspaper operations."

He noted that the plan allows for claims of Affiliated Media's trade creditors, suppliers and employees to be unaffected by the filing and paid in the ordinary course as they come due. Almost all of the company's trade creditors, suppliers and employees are totally unaffected in any event since none of the individual newspaper operations are involved in the reorganization plan.

"For them, it's business as usual," he said.

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.

By accepting the prepackaged plan, senior lenders will trade their existing claims and guarantees for a pro-rata share of the new secured term loan, in a smaller principal amount but with more collateral and a more financially sound borrower, as well as ownership of a majority of the new equity of the reorganized company, subject to a gradual dilution as a result of grants of restricted stock.

Subordinated note holders will receive warrants for future equity. All existing equity interests in Affiliated Media will be cancelled.

In contrast with most filings, where creditors may oppose the proposed plan for re-organization, a prepackaged filing means that affected creditors have already seen and accepted the plan prior to the time it is filed, so that it can proceed with little debate or negotiation, and can swiftly win approval from the court.

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.

Singleton said that in recent years, the company has undertaken a number of strategic initiatives to improve operating cash flow and to reduce costs. But it became clear yesterday's balance sheet couldn't be sustained by today's business environment.

Singleton saaid 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.

The growth included gains by Media News flagship paper, the Denver Post, after the Rocky Mountain News, its primary competitor, ceased publication. Excluding the Denver gain, the company's circulation dropped 4.8 percent, still well below the industry's 10.6 percent decline.

The PR Newswire report also stated that Media News advertising overall has declined less than the industry as a whole.

"December quarter advertising results have shown substantially smaller declines than were experienced in the first nine months of the year," the report stated, adding that all but one of the company's newspapers are profitable.

"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 Affiliated Media, Inc./Media News prepackaged bankruptcy filing would be at least the 13th bankruptcy filing by a U.S. newspaper publisher in the past 13 months.

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.

"The economic downturn has lasted much longer than anticipated," Bee Publisher and President Cheryl Dell said in a memo to employees.

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Like this comment
Posted by Ruth
a resident of Another Pleasanton neighborhood
on Jan 18, 2010 at 8:04 am

All those newspapers are wings of the democrat party. If they would conduct more investigative reporting of government programs, government expenditures, etc. they would have more readership. They've dug their own graves. (Seems like the Editor of the PW should be taking notes, too! But no...we continue to get glowing articles of democrat incumbents McNerney, Boxer, etc., with absolutely no probing, no questioning, no debate for sake of devil's advocating.)

Like this comment
Posted by Fish Rappers
a resident of Another Pleasanton neighborhood
on Jan 18, 2010 at 8:41 am

The Media News CEO says there is going to be a great consolidation of their newspapers. This would be a really good time for them to review their content with a critical eye. While the internet is one reason they are failing, the other big reason is because they are bastions of left-wing loonism. The news coverage by their Bay Area papers is infused with left-wing bias and their editorials are so one-sided they are comical and at the same time outrageous. They do very little investigative reporting. The Contra Costa Times and Valley Times have become jokes. The "news" has been relegated to a middle section, while the front section of the paper has become mostly an advertising rag with a collection of left-wing biased "human interest" stories. My, how far they have fallen since they were owned by Dean Lesher. But, you knew it would happen once they were bought by Knight Ridder. Cancel your subscription to these rags and subscribe to The Wall Street Journal.

Note to the Pleasanton Weekly - You better give up your left-wing bias as well, and start getting some real content, or you will suffer the same fate.

Like this comment
Posted by Rick
a resident of Another Pleasanton neighborhood
on Jan 18, 2010 at 9:21 am

Agreed the Pleasanton Weekly is left wing too.

Like this comment
Posted by dublinmike
a resident of Dublin
on Jan 18, 2010 at 9:50 am

dublinmike is a registered user.

What does Al Davis and William Dean Singleton have in common? They don't know when it's time to go and it's everyone else is at fault.

I followed the many times the CC Times was purchased. Each time a major corporation took on significant debt to acquired this paper (or secured debt later). But, Singleton's cluster purchases were doomed from the beginning. No rocket science here. His ego got in the way.

Regarding Singleton's political persuasion, he's an equal opportunist. It's all about the interests of his empire that likely motivate his contributions. He has given money to both Democrats and Republicans. President Bush, President Regan, Gov. Mitt Romney come to mind, but he also gave to Bill Richardson.

Like this comment
Posted by Bill
a resident of Livermore
on Jan 18, 2010 at 9:55 am

We also stop subscribing to the Times because of its left-biased content. They offered to lower the price. I told them it wasn't the price, but the one-sided and unbalanced reporting that we didn't like. They didn't get it then and they still don't get it now.

Like this comment
Posted by ToBill
a resident of Hacienda Gardens
on Jan 18, 2010 at 11:07 am

You are right. They will give money to any party they think will change laws behind closed doors including a pass on their unions taxes while the rest of us pay for a health bill filled with pork.

The media is biased. It is a fact.

Like this comment
Posted by Lets Get Real
a resident of Livermore
on Jan 18, 2010 at 11:18 am

Please - let's be rasonable about the allegations of a liberal media bias.

There is an entire News Agency devoted to bashing anyone who does not hare their point of view (Fox News, apolular radio host who will say anyting to keep himself in the news (Rugh Limbaugh) and you acuse the newspapers of being liberal because you do not agree with them?

Here is a quote that is just for you.

"Don't let the facts get in the way of your arguments"!

Like this comment
Posted by Amber
a resident of Country Fair
on Jan 18, 2010 at 11:46 am

I agree with the above majority in that these papers are biased and unbalanced. They lean toward the left wing always. They are now getting the results of what they reaped for years.

Like this comment
Posted by Steve
a resident of Birdland
on Jan 18, 2010 at 3:42 pm

Besides being left leaning, they are no longer 'local' papers. I delivered the T.V. Herald as a kid back in the 70's and loved reading all the local high school sports and dreamed one day my name would be in there too. Well I succeeded at getting my name and picture in there a few times, but now you open the paper after a Friday night of high school football or basketball and guess what? No local coverage, just news on teams from the peninsula or teams in Stockton. The local section is filled with news from San Leandro, Hayward or Oakland. Apparently our little corner of the world does not garner any left sided news worthy for us to read.

Like this comment
Posted by Fully Informed
a resident of Another Pleasanton neighborhood
on Jan 18, 2010 at 5:50 pm

Most above are wrong and really shouldn't comment since most of them do not currently take the papers...I recognize the thinking..they didn't like an editorial 4 or 5 years ago, cancelled, and haven't SEEN a paper in some time. I am a Republican and know those kind...who disgust me with that thinking. I take daily CCTimes & Herald, and week-end Chron, and I watch many cable stations like C-Span and listen to mainstream radio. I LIKE being INFORMED with ALL thinking,including opposition research. Only dummies live in a vacuum.
The finest public service ANY reporter, newspaper, or media host has performed in recent decades is Dan Borenstein's ongoing reports...for the last 2 years, on the CA PUBLIC UNION crisis !! A truly fine, professional, investigative, and informative public service. Of course those that have not seen those in-depth articles wouldn't know about them, or have the ability to know the numbers to launch an informed, much needed fight againt CA public unions with facts.
I do think only the Chron or NewYork Times, are as blatently, liberal left as the PW...which thus clouds their perspective, biased headlines, and selection of coverage...when they venture into partisan politics. Discussing charities, traffic & city services is neighborly, but VERY different than campaigning and crusading for partisan political candidates and issues,pretending to still be just simple neighborly comments. Professional ethics should prevent such manipulation....--- I certainly wish our Valley Times well. They have provided a first class paper for decades. Even tho mostly the same, TV Herald is not quite as complete. Our Republic depends on open, varied press, Otherwise, we'll just have Pravada.

Like this comment
Posted by dublinmike
a resident of Dublin
on Jan 18, 2010 at 8:33 pm

dublinmike is a registered user.

Well, it comes down to the good-old American capitalistic system, vote with you pocket book. DON'T subscribe. Read Fox and the Wall Street News. But, for you balanced people, please read other viewpoints as I do.

My liberal friends think I am conservative because I listen to George Will or Pat Buchanan. My conservative friends and conservative brother(loves Palin) think I'm liberal because I watch Olbermann or Rachel Maddow.

Olbermann, Maddow, daily Kos, Huffington make CC Times and Herald BLATANTLY BORING. Bottom line, read beyond your limited imagination. You might find, just maybe, that the "liberal" CC Times and Herald are really center-oriented... and ad-revenue oriented. American capitalism! Geez.

Reality check. :) Ruth, et al, will not be reading what I just posted... duh. They are unable. Oh, well. Bless the United States and our freedom.

Like this comment
Posted by rs
a resident of Pleasanton Valley
on Jan 19, 2010 at 12:01 pm

They our to Liberal or Progessive for most people. They have made their own bed that has led to this.
We need media who report the news not make it.

Like this comment
Posted by Gunslinger
a resident of Danville
on Jan 19, 2010 at 1:59 pm

Ruth, you are dead on. Let's Get Real, you're right, papers like this are as biased as Fox. The difference is fox admits they're conservative and they serve conservatives (they're actually warmonging neocons, which is not the same as conservatives, whom no one but Lou Dobbs truly represented). So why doesn't the CCT and all these local papers admit they're left wing radicals who have a contempt for the conservatives of the very area they attempt to serve? Because they're dishonest manufacturers of propaganda. And it's extremely dangerous propaganda, to the point where they libelously claim things that aren't true, even to the point of demonizing murdered children for the sake of their goals. Look up Rylan Fuchs

Like this comment
Posted by CCapDGIT
a resident of Lemoine Ranch
on Jan 20, 2010 at 11:36 pm

News Paper advertising is over. Companies like DG FastChannel(DGIT) distribute digital media, no need for news paper advertising anymore...............

Sorry, but further commenting on this topic has been closed.

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