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Pennsylvania Newspaper Bankruptcies Signal More Trouble Ahead
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By Greg Bensinger and Steven Church
Feb. 23 (Bloomberg) -- Bankruptcy filings by the publishers of the Philadelphia Inquirer and the New Haven Register are the latest sign the persistent decline in advertising may push newspapers to consider more job cuts, shutdowns or restructurings.
Journal Register Co., the Yardley, Pennsylvania-based owner of 20 daily newspapers including the New Haven Register, said Feb. 21 that “slumping advertising revenues” contributed to its Chapter 11 petition seeking protection from creditors. Philadelphia Newspapers LLC, the owner of the Inquirer and the Philadelphia Daily News, filed a Chapter 11 petition yesterday.
“There’s no real sign that there’s going to be any meaningful economic recovery this year,” Ken Doctor, an analyst at media consultant Outsell Inc. in Burlingame, California, said in a telephone interview yesterday. “These companies that have been weakened by these poor advertising sales are going to have to make tough decisions about their future.”
The bankruptcy filings follow petitions by Tribune Co. and the Minneapolis Star Tribune, which were unable to quell mounting financial pressures as credit markets tightened and more readers and advertisers moved to the Internet.
Industrywide print advertising sales endured their worst plunge in at least 37 years in last year’s third quarter, according to the Newspaper Association of America.
‘Troubled Publishers’
More newspaper companies are in danger, according to Fitch Ratings analyst Mike Simonton in Chicago.
“Fitch expects there to be more publishers and lenders that will face this decision in 2009 and 2010,” Simonton said. “There are a number of other troubled publishers that will struggle to stay within their lending covenants, cover their interest payments and repay or refinance maturities as debt comes due.”
Philadelphia Newspapers listed both assets and debt of as much as $500 million each in a filing yesterday in U.S. Bankruptcy Court in Philadelphia. The Chapter 11 cases are “balance sheet restructuring” cases, not “operational restructuring” cases, the company said in court papers.
Brian Tierney and partners including Bruce Toll, co-founder of homebuilder Toll Bros., had no experience running a newspaper before they bought the Philadelphia Inquirer in May 2006. Tierney, an advertising executive, said the purchase of the Inquirer would return the paper “to a family of civic-minded, long-term investors.”
Cost Cuts
Five months after buying the publications, Tierney cited weak advertising revenue when eliminating 68 jobs, or 17 percent of the Inquirer’s editorial staff. In January 2008, Tierney told employees costs had to be reduced by 10 percent to avoid “a dire situation.”
The Inquirer, founded in 1829, is the third-oldest daily newspaper in the U.S. The Daily News, a tabloid, was founded in 1925. The newspapers were among 12 former Knight Ridder Inc. newspapers that Sacramento, California-based McClatchy Co. sold after acquiring the chain in June 2006 for $4.1 billion.
Journal Register would cancel its stock and become a closely held company owned by its lenders under a proposed reorganization plan filed in U.S. Bankruptcy Court in New York. It listed debt of as much as $1 billion and assets of between $100 million and $500 million in Chapter 11 documents.
“With the increased competition from other forms of media and slumping advertising revenues, the downward pressure on newspaper earnings will likely remain intense in the near term,” company Chief Executive Officer James Hall said in court papers.
New York Times Co., McClatchy and Media General Inc. halted payment of their quarterly dividend this year in response to dwindling ad sales. Gannett Co. cut about 4,000 jobs in 2008 and, like other publishers, is seeking to sell assets.
Jet, Country Club
Journal Register employs about 3,500 people and operates primarily in the Philadelphia and Cleveland areas, as well as throughout Michigan. Shares of the company traded for less then 1 cent on Feb. 20.
The publisher paid $415 million for its Michigan dailies in 2004 and has reported losses for four straight quarters as ads from the car industry evaporated. Since 2006, Journal Register’s revenue has dropped by more than 20 percent, Hall said.
In 2007, the company started cutting costs by selling its corporate jet, eliminating management bonuses and country club memberships, closing publications and firing workers.
The cases are In re Journal Register Co. 09-10769 U.S. Bankruptcy Court, Southern District of New York (Manhattan), and In re Philadelphia Newspapers LLC, 09-11204, U.S. Bankruptcy Court, Eastern District of Pennsylvania (Philadelphia).
To contact the reporters on this story: Greg Bensinger in New York at gbensinger1@bloomberg.net; Steven Church in Wilmington, Delaware, at schurch3@bloomberg.net.
Last Updated: February 23, 2009 00:32 EST
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Email | Print | A A A
By Greg Bensinger and Steven Church
Feb. 23 (Bloomberg) -- Bankruptcy filings by the publishers of the Philadelphia Inquirer and the New Haven Register are the latest sign the persistent decline in advertising may push newspapers to consider more job cuts, shutdowns or restructurings.
Journal Register Co., the Yardley, Pennsylvania-based owner of 20 daily newspapers including the New Haven Register, said Feb. 21 that “slumping advertising revenues” contributed to its Chapter 11 petition seeking protection from creditors. Philadelphia Newspapers LLC, the owner of the Inquirer and the Philadelphia Daily News, filed a Chapter 11 petition yesterday.
“There’s no real sign that there’s going to be any meaningful economic recovery this year,” Ken Doctor, an analyst at media consultant Outsell Inc. in Burlingame, California, said in a telephone interview yesterday. “These companies that have been weakened by these poor advertising sales are going to have to make tough decisions about their future.”
The bankruptcy filings follow petitions by Tribune Co. and the Minneapolis Star Tribune, which were unable to quell mounting financial pressures as credit markets tightened and more readers and advertisers moved to the Internet.
Industrywide print advertising sales endured their worst plunge in at least 37 years in last year’s third quarter, according to the Newspaper Association of America.
‘Troubled Publishers’
More newspaper companies are in danger, according to Fitch Ratings analyst Mike Simonton in Chicago.
“Fitch expects there to be more publishers and lenders that will face this decision in 2009 and 2010,” Simonton said. “There are a number of other troubled publishers that will struggle to stay within their lending covenants, cover their interest payments and repay or refinance maturities as debt comes due.”
Philadelphia Newspapers listed both assets and debt of as much as $500 million each in a filing yesterday in U.S. Bankruptcy Court in Philadelphia. The Chapter 11 cases are “balance sheet restructuring” cases, not “operational restructuring” cases, the company said in court papers.
Brian Tierney and partners including Bruce Toll, co-founder of homebuilder Toll Bros., had no experience running a newspaper before they bought the Philadelphia Inquirer in May 2006. Tierney, an advertising executive, said the purchase of the Inquirer would return the paper “to a family of civic-minded, long-term investors.”
Cost Cuts
Five months after buying the publications, Tierney cited weak advertising revenue when eliminating 68 jobs, or 17 percent of the Inquirer’s editorial staff. In January 2008, Tierney told employees costs had to be reduced by 10 percent to avoid “a dire situation.”
The Inquirer, founded in 1829, is the third-oldest daily newspaper in the U.S. The Daily News, a tabloid, was founded in 1925. The newspapers were among 12 former Knight Ridder Inc. newspapers that Sacramento, California-based McClatchy Co. sold after acquiring the chain in June 2006 for $4.1 billion.
Journal Register would cancel its stock and become a closely held company owned by its lenders under a proposed reorganization plan filed in U.S. Bankruptcy Court in New York. It listed debt of as much as $1 billion and assets of between $100 million and $500 million in Chapter 11 documents.
“With the increased competition from other forms of media and slumping advertising revenues, the downward pressure on newspaper earnings will likely remain intense in the near term,” company Chief Executive Officer James Hall said in court papers.
New York Times Co., McClatchy and Media General Inc. halted payment of their quarterly dividend this year in response to dwindling ad sales. Gannett Co. cut about 4,000 jobs in 2008 and, like other publishers, is seeking to sell assets.
Jet, Country Club
Journal Register employs about 3,500 people and operates primarily in the Philadelphia and Cleveland areas, as well as throughout Michigan. Shares of the company traded for less then 1 cent on Feb. 20.
The publisher paid $415 million for its Michigan dailies in 2004 and has reported losses for four straight quarters as ads from the car industry evaporated. Since 2006, Journal Register’s revenue has dropped by more than 20 percent, Hall said.
In 2007, the company started cutting costs by selling its corporate jet, eliminating management bonuses and country club memberships, closing publications and firing workers.
The cases are In re Journal Register Co. 09-10769 U.S. Bankruptcy Court, Southern District of New York (Manhattan), and In re Philadelphia Newspapers LLC, 09-11204, U.S. Bankruptcy Court, Eastern District of Pennsylvania (Philadelphia).
To contact the reporters on this story: Greg Bensinger in New York at gbensinger1@bloomberg.net; Steven Church in Wilmington, Delaware, at schurch3@bloomberg.net.
Last Updated: February 23, 2009 00:32 EST
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