By: Joe Strupp The owner of The Philadelphia Inquirer and Philadelphia Daily News is facing more debt troubles, according to a Standard & Poors report that says the company has received a forbearance agreement from creditors through Sept. 10.
The S&P report, issued Aug. 1, states: "Philadelphia Media Holdings has won lender support for a forbearance agreement that runs through Sept. 10 ? as previously reported, lenders had been asked to forbear a default stemming from a covenant violation at the end of the fourth quarter."
Philadelphia Magazine reported that the S&P disclosure means that Philadelphia Media Holdings "will face a serious financial penalty ? interest on its debt will climb a full percentage point ? in exchange for being allowed to skip payments during that period. PMH has also offered to surrender $15 million from its revolving line of credit, reducing it to $35 million."
Philadelphia Media Holdings is the investor group formed by publisher Brian Tierney that acquired the newspapers in 2006. In recent months, the company has had to renegotiate a missed debt payment, while just last week asking unions to consider bypassing scheduled September raises.
Sought for comment, PMH spokesman Jay Devine responded to E&P with an e-mail that stated only: "As a private company, we will not have any comment on the S&P or any other financial report."
"The change in the line of credit is moot, yet speaks volumes," Philadelphia magazine stated about the latest move. "The company is already prohibited from accessing its credit line after violating a term of their loan covenant several months ago. S&P is also reporting that PMH is seeking a $3.2 million letter of credit ? a short-term, stop-gap funding measure.
"Perhaps most tellingly, the market is shying away from a media ship that looks increasingly like the Titanic," the magazine added. "PMH?s loan was trading at 70 cents a dollar in early June, but is now trading in the mid 40s ? another signal that the market believes PMH is in serious financial difficulty."
?The good news is their lenders are continuing to work with them,? Chris Donnelly, vice president of Standard & Poor?s LCD, told the magazine. ?Without an agreement that gives them access to their revolving credit line, they probably have a very challenging cash position. But this buys them some time to negotiate a permanent solution.?
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