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SAN FRANCISCO (AP) – Another newspaper publisher desperate to dump debt has filed for bankruptcy protection in hopes of recovering from an advertising meltdown that has obliterated much of the print media’s revenue.
Friday’s late filing by Affiliated Media Inc., the holding company of MediaNews Group, had been expected. The owner of 54 U.S. daily newspapers said Jan. 15 that it would seek to reorganize its finances in bankruptcy court.
MediaNews, based in Denver, says its newspapers, which include The Denver Post and the San Jose Mercury News, and 8,700 employees won’t be affected during the bankruptcy proceedings. The company also owns four radio stations in Texas and a television station in Alaska.
At least 14 U.S. newspaper publishers have now filed for bankruptcy protection in the past 13 months.
Privately held Affiliated Media worked with its major lenders and shareholders during the past year to hammer out a plan aimed at shortening the company’s stay in federal bankruptcy court in Delaware. Affiliated hopes to emerge from bankruptcy protection within two months.
The plan calls for Affiliated’s debt to fall to $179 million from $930 million, according documents filed late Friday and early Saturday.
In exchange for this $751 million concession, a group of lenders led by Bank of America will become the company’s majority owners with 89 percent of the common stock, according to a disclosure statement filed Saturday. The remaining 11 percent goes to MediaNews’ management team, which is led by William Dean Singleton, who is also chairman of The Associated Press. The MediaNews executives will receive warrants that eventually could boost their combined stakes to 20 percent.
Heading into the bankruptcy filing, Singleton held a roughly 30 percent stake in Affiliated.
Richard Scudder, who co-founded MediaNews with Singleton in 1985, will relinquish his interests in the company to the lenders. Another major newspaper publisher, Hearst Corp., also will surrender a 30 percent stake it acquired in Affiliated’s newspapers outside the San Francisco Bay area as part of a complex $317 million deal in 2006.
Singleton will continue to run MediaNews, signaling the lenders remain confident in him despite the company’s recent struggles.
The decision probably stems from Singleton’s reputation as a hard-nosed businessman who has never shied away from cutting costs, said Alan Mutter, a former newspaper editor who blogs on the media business.
“Who do we know who can go in and run the hell out of a newspaper and make a buck?” he said. “The only answer is William Dean Singleton.”
MediaNews spokesman Seth Faison declined to comment late Friday.
“By aggressively facing the challenges of the newspaper business, we will continue to deliver high-quality journalism and will prepare our newspapers for a promising future,” Singleton said in a statement Friday.
Affiliated’s annual revenue has fallen by $270 million, or 20 percent, during the past two fiscal years, according to court documents.
To cushion the financial blow, Singleton has reduced Affiliated’s expenses by $385 million, or 31 percent, since the end of 2006, according to court documents.
Affiliated still lost $582 million as revenue fell 10 percent to $1.06 billion in its last fiscal year ending June 30, the documents show. That came on top of a $406 million loss in the previous fiscal year. The losses stemmed from accounting charges taken to reflect the crumbling value of its newspapers.
Despite Affiliated’s troubles, Singleton says all but one of the company’s newspapers are profitable. He hasn’t identified which one is losing money.
But Singleton couldn’t figure out a way to cope with all the debt that MediaNews took on to expand into new markets. Like other publishers, Singleton borrowed heavily before the Internet and recent recession began to devour the newspaper’s main source of income – advertising.
Last year was particularly hard on big newspapers as the industry’s print ad sales plunged by nearly 30 percent. Some of the revenue is expected to return as the economy bounces back, but much of it is expected to remain on the Internet, where many marketers are finding they can generate more sales for less money.
Affiliated is bracing for more tight times ahead. In a disclosure statement, the company discusses possible savings from farming out some production, newsroom and administrative jobs and imposing permanent wage cuts at some newspapers beginning this year.
The reorganization plan calls for Singleton to receive a $634,000 salary and an annual bonus of up to $500,000 as Affiliated’s chief executive. He will also continue to be paid $360,000 annually under a separate agreement with The Denver Post Corp., according to court documents.
Joseph Lodovic IV, Affiliated’s president, will get a $1 million salary, an annual bonus of up to $500,000 and 3 percent of the reorganized company’s stock, according to court documents. He has already earned $500,000 in bonuses for overseeing recent changes at the Denver newspaper and helping to gather lender support for the reorganization. He is eligible for an additional bonus of up to $250,000, contingent on the timing of the plan’s approval.
AP Business Writers Andrew Vanacore in New York contributed to this report.