By: E&P Staff Lenders to MediaNews Group, the nation's second-biggest chain of newspapers, will get the great majority of its equity but not control of the company when its holding company files a prepackaged Chapter 11 bankruptcy reorganization.
MediaNews Chairman and CEO William Dean Singleton said the reorganization of the holding company, Affiliated Media Inc., will shrink its debt from about $930 million to $165 million.
The plan has already been approved by the 100-plus lenders led by Bank of America, and will affect only the holding company and not its 54 dailies and more than 100 community papers, Singleton said in its announcement late Friday. "It does not affect any of our newspapers or vendors or other operations," Singleton said in a statement. The company is current on all its vendor payments, he added.
Singleton and MediaNews Group President Joseph J. "Jody" Lodovic IV will continue to control the company through ownership of Class A stock that entitles them to name the majority of board members. In addition, the Singleton-led management will be authorized to own 20% of the company through stocks and warrants.
The prepackaged bankruptcy -- so called because lenders agree in advance to the plan -- will break up two partnerships forged by Singleton in his often unconventional route to becoming a newspaper mogul.
According to published reports citing people familiar with the bankruptcy plan, Richard Scudder, the New Jersey businessman who had already had a long career as publisher when he partnered with Singleton to buy a daily in 1983, will liquidate his interest in MediaNews.
Also ending its business relationship with MediaNews will be The Hearst Corp., these same sources said. Hearst invested more than $317 million in MediaNews assets held outside of the San Francisco Bay Area when it bought The Monterey County (Calif.) Herald and St. Paul Pioneer Press from McClatchy Co. in the 2006 blockbuster acquisition of Knight Ridder. Using the investment, MediaNews bought the papers and a third Bay Area paper.
Singleton had stoutly denied reports that the heavily leveraged company had ever violated any of its loan covenants, and maintained in MediaNews' statement Friday that all its newspapers except on unnamed publication are profitable.
The reorganization, he said, "restores financial strength and flexibility to our balance sheet. ... It gives us one of the strongest balance sheeting in the industry. It gives us breathing space to create a new model for the newspapers we publish."
Affiliated Media's announcement it will file for bankruptcy came just a day after Florida Times-Union parent Morris Publishing Group announced it had filed a prepackaged bankruptcy.
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CORRECTION: An earlier version of this report misidentified a newspaper owned by Morris Publishing Group.
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