Up to 13 Conn. papers may close if no buyer found

[November 12, 2008]  NEW BRITAIN, Conn. (AP) -- Newspaper publisher Journal Register Co. plans to close up to 13 of the newspapers it owns in Connecticut if it can't find a buyer for them.

The debt-heavy company, owner of the New Haven Register and The Middletown Press, is a leader in a trend coursing through the newspaper industry, where cash flows aren't keeping up with debt loads. The trend is leading to major cuts and other changes at newspapers already beat up by readers' and advertisers' long-term migration to the Internet and a severe drop in ad revenue this year.

"The way business is headed, there's going to be gigantic changes in the business fundamentals," said analyst Ed Atorino of Benchmark Co. "This will not be the last."

Employees of The Herald of New Britain and The Bristol Press were told Monday that the daily newspapers will close if a buyer isn't found by Jan. 12. In a memo, publisher Edward Gunderson said that "in the event that there is no buyer, then we anticipate the facility will be shut down."

Journal Register has been the subject of speculation all year as sagging revenues and its massive debt pushed its credit rating into junk status. The company's stock, which traded as high as $23.875 a decade ago, now goes for about a penny and was removed from the listings of the New York Stock Exchange in April.

"The pressures on Journal Register and other companies that have been delisted are just growing," said Ken Doctor, a news industry analyst with Outsell Inc. "There's a tightening vise."

Gunderson sent the same memo to employees at the 11 weekly papers in the company's Imprint Newspapers division saying. If the papers are not sold and do close, their journalists and business personnel would "not have the right to displace other employees" with less seniority at other Journal Register papers, Gunderson wrote.

None of the 13 papers has its own press.

Gunderson declined to speak with The Associated Press Tuesday, and a call to Journal Register's Yardley, Pa., headquarters for elaboration was not returned.

In its quarterly earnings report, Journal Register said a forbearance agreement it reached in July with lenders has been extended to Jan. 16, after which the lenders could prompt a default if the company misses payments.

The timing of the Jan. 12 deadline and the forbearance extension indicates that the company's lenders are exerting more pressure on the publisher to shed unprofitable newspapers, Doctor said.

It wasn't immediately clear how many workers would be affected if the papers went out of business.

Steve Collins, who covers politics and city government for The Bristol Press, said he's not "holding my breath" that a buyer will save the papers. His wife, Jackie Majerus, covers city government and business at the newspaper.

"You always have hope," he said. "I truly believe that there's a viable market here. To the degree that any community newspaper can survive in this day and age there are certainly prospects here."

Bristol, a community of 60,000, is best known for being headquarters of sports network ESPN, while neighboring New Britain has about 70,000 residents and is home to toolmaker Stanley Works and Central Connecticut State University.

The Herald, which began publication in 1881, has a Monday-through-Saturday circulation of 8,940, while the circulation of the Press, founded in 1871, is 8,047 Monday through Saturday, according to the Audit Bureau of Circulations.

A combined Sunday edition of the papers, The Herald Press, has a circulation of 19,016.

Newspapers across the country have been dealing with reduced cash flow caused by advertising revenue declining faster than anticipated this year.

Cincinnati-based E.W. Scripps Co. announced last week it would lay off 400 people, and the Kansas City Star said Monday it will lay off 50 workers. Several smaller Ohio newspapers have also stopped publishing on Mondays to save money.

The nation's largest newspaper publisher, Gannett Co., laid off 10 percent of its work force in August and announced plans last month to lay off another 10 percent because of weak advertising revenues.

Once a reliable source of cash flow, newspapers have an uncertain future because of the weakened economy, Doctor said, and owners who might rather not cope with that future are nonetheless being forced to because willing buyers are few to nonexistent.

"They don't have the options that newspaper companies had three years ago," he said. "It would have been unthinkable three years ago to have newspapers in U.S. markets that can't find a buyer."

Newspaper owners that can't sell an unprofitable publications are closing some, cutting staffs at some and in some cases publishing less often.

"Companies are starting to think about the basic fundamentals of journalism," Atorino said.

Problems at Journal Register, which owns 22 daily newspapers and about 300 non-daily publications nationwide, began mounting last year, when its shares began a steady decline and advertising revenues shrank.

Around the time its shares were delisted, Journal Register disclosed that it hired a financial adviser to consider a possible sale.

For the third quarter, which ended Sept. 28, Journal Register reported a loss of $8.7 million, compared with net income of $11.2 million a year earlier.

Advertising revenue companywide dropped 13 percent to $74.3 million from a year earlier.

The company has also been hindered by its bank debt, which totaled $646.3 million at the end of the third quarter. It says it has $85.6 million in assets and $729.7 million in liabilities.

Journal Register's other holdings in Connecticut include The Register Citizen of Torrington, 17 weekly newspapers and Connecticut Magazine.

[Associated Press; By PATRICK SANDERS]

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