Q3 Earnings Fall 21% at American Consolidated Media, Loan Agreement Violation Expected

By: Mark Fitzgerald Dallas-based American Consolidated Media (ACM) is cash-flow positive despite earnings that fell 21% in the third quarter -- but it expects to be in violation of its loan agreements, its Australian parent says.

Sydney-based Macquarie Media Group (MMG) also told the Australian Stock Exchange that it expects an audit report to lenders due later this month will include statements expressing concern about ACM's ability to continue as a "going concern."

ACM, publisher of more than two dozen community dailies including The Daily Tribune in Hibbing, Minn., and The Athens (Ohio) Messenger, "continues to generate positive operational free cash flows from which it is meeting all interest payments under its US $133.7 million business level bank facility," MMG said.

It noted that the third quarter 21% decline in EBITDA (earnings before interest, taxes, depreciation and amortization) represents a "lower rate of decline" year-over-year from the first six months of 2009.

But MMG says it expects ACM will violate loan covenants related to the permissible amount of debt compared to EBITDA. And the Australian parent, which acquired ACM in February 2007, said it does not intend make a cash infusion to the chain.

If ACM does not get a waiver or agreement amendment, MMG said, its lenders would have the right to demand accelerated repayment of the debt, and could take possession of the company from MMG.

Macquarie said its other subsidiaries would not be affected by an ACM default. It said the chain contributes about 17% of MMG's overall operating EBITDA, and "is considered a non-core asset."

MMG said it carries net assets relating to ACM on its balance sheet with a value of $81.2 million as of June 30.