News group $225 million in debt after bankruptcy

Posted: July 09, 2009

Yardley-based Journal Register Co., which owns newspapers throughout the Philadelphia suburbs, will emerge from bankruptcy $225 million in debt, secured by first and third liens on all its assets, under the reorganization plan approved this week.

That figure is much lighter than the $695 million owed to secured creditors and $27 million in unsecured debt cited when the company filed for Chapter 11 protection on Feb. 21.

In addition to the new debt, which will bear interest of 15 percent annually and mature in four or five years, secured creditors will receive 100 percent of new common stock, according to the that plan Bankruptcy Judge Allan L. Gropper of the Southern District of New York signed Tuesday.

Estimated enterprise value (debt plus equity) of the reorganized firm is $300 million, said Journal Register's financial adviser, Eric R. Mendelsohn of Lazard Freres & Co.

Among the chain's holdings are the Pottstown Mercury, the Delaware County Daily Times, the Times Herald of Norristown, and the West Chester Daily Local News. It also operates papers in New York, Michigan, and Connecticut.

Gropper dismissed objections filed by the state of Connecticut and the Newspaper Guild/Communication Workers of America over $1.3 million in incentives for "key employees" to push through provisions of the plan, including "shutdown" and "cost-reduction" objectives.

Connecticut, which has a $21.5 million tax-deficiency claim against Journal Register, may appeal, Attorney General Richard Blumenthal said yesterday.

Journal Register executives will be "substantially rewarded more than $1.3 million in blatantly undeserved bonuses for shutting down newspapers and laying off employees," he said.

The Newspaper Guild's Carol Rothman said yesterday, "It is still possible that we may appeal, but the judge appeared to say that his decision was in line with standard procedures, and it was up to the union and the state of Connecticut to prove to the contrary."

Albert Paschall, chairman of the Chamber of Commerce in Montgomery County, where Journal Register operates three daily newspapers and weeklies such as the Ambler Gazette, said he hoped reorganization would give them "a new lease on life."

"It could work if major changes are made," Paschall said, especially if it "will sweep clean old ideas and bring in new, contemporary management."

How the company fares in a recessionary climate with sharp declines in advertising revenue "depends on what their debt payments are," said industry analyst John Morton.

Journal Register had about $50 million in earnings before interest, taxes, depreciation, and amortization in 2008, Morton said, "and, even assuming that has been dropping by a third or so so far on an annual basis, I suspect they will be able to cover their obligations."

Debt obligations and working-capital needs will be funded primarily with about $36 million in cash from operations, which interim CEO Robert Conway said would be sufficient.

Contact real estate writer Alan J. Heavens at 215-854-2472 or

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