Philly newspaper owner latest to file Chapter 11

[February 23, 2009]  PHILADELPHIA (AP) -- The downward spiral of advertising revenue and circulation, coupled with rising debt, has claimed two more newspaper companies in a two-day span.

The owner of Philadelphia's two major daily papers filed for Chapter 11 bankruptcy protection Sunday in an effort to restructure its increasing debt load. The move comes a day after the Journal Register Co. sought protection.

The filings are the latest blow to a staggering industry. The Chicago-based Tribune Co. sought bankruptcy protection in December, and The Star Tribune of Minneapolis followed suit last month.

On Sunday, Philadelphia Newspapers Inc., the owner of The Philadelphia Inquirer and Philadelphia Daily News filed, citing debts of $390 million.

"This restructuring is focused solely on our debt, not our operations," chief executive officer Brian P. Tierney said in a statement. "Our operations are sound and profitable."

The filing Sunday indicated the company has between $100 million and $500 million in assets and liabilities in the same range. The company said it will continue the normal operations of its newspapers, magazines and online businesses without interruption during the debt-restructuring process.

"In the last two years, we experienced the rare trifecta of a dramatic decline in revenue, the worst economic crisis since the Great Depression and a debt structure out of line with current economic realities," Tierney said.

Tierney said the company's goal was to bring its debt in line with "the realities of the current economic and business conditions."

The company said it decided to turn to bankruptcy after negotiating with its lenders for the last 11 months.

The filings reiterate that the newspaper company hopes to reconfigure its debt rather than restructure its operations. The company was profitable by one accounting measure last year, earning $36 million before interest, taxes, depreciation and amortization, and excluding one-time items. That figure is expected to be at least $25 million in 2009.

Tierney said in his statement that, in conjunction with its filing, the company is seeking court approval of up to $25 million in debtor-in-possession financing. That proposed financing, plus the cash flow from operations, will ensure the company's ability to satisfy obligations associated with its normal course of business, including wages and benefits, as well as payment of post-petition obligations to vendors under existing terms.

The company has long sought to offset declines in advertising revenue and circulation with moneysaving moves and improved efficiency, including sharing editorial functions of the two papers' newsrooms.

The Newspaper Guild of Greater Philadelphia notified its union members of the filing in an e-mail Sunday night.

The e-mail, obtained by The Associated Press, tells members to stay calm and report for work and that "the company is still in business, the papers are still publishing." The communication tells Guild members the union contract remains in full force and that workers' wages and benefits will continue to be paid.

A group of investors led by Tierney bought the two Philadelphia papers for $562 million in June 2006.

According to the Audit Bureau of Circulations, the Inquirer had an average weekday circulation of 300,674 as of Sept. 30, down 11 percent from the prior year. That made it the nation's No. 19 daily by circulation.

The paper's Sunday circulation averaged 556,426 as of Sept. 30, down 14 percent from the prior year. It ranks as the eighth-largest Sunday paper.

As of March 31, 2008, the last audited report from the ABC, the Daily News had an average weekday circulation of 109,923.

The Yardley, Pa.-based Journal Register has been struggling for months with sagging circulation and advertising revenues and a massive debt, which pushed its credit rating into junk status. The company owns 20 daily and 159 non-daily newspapers, serving greater Philadelphia, Michigan, Connecticut, the greater Cleveland area and parts of New York state. It has about 3,500 employees.

[Associated Press; By BOB LENTZ]

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