Newspapers miss debt obligations, but sale or closure unlikely because that won't help lenders

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Liquidation unlikely as papers miss obligations

Monday October 13, 12:01 am ET

By Anick Jesdanun, AP Business Writer
Newspapers miss debt obligations, but sale or closure unlikely because that won't help lenders

NEW YORK (AP) -- Newspaper companies have been skipping loan payments, missing financial targets in debt agreements and accepting higher interest rates in exchange for more flexibility -- and they're not even directly feeling the impact of the credit crisis yet.

But don't expect massive sales or closures of newspapers any time soon, even though at least four newspaper companies overburdened with debt have been forced to confront their lenders over the past few weeks.

With revenue at newspapers shrinking and few investors willing or able to buy them, lenders are loathe to force companies to liquidate assets that are plunging in value. They have few alternatives but to help newspapers stay on track with their payments and hang on until ad prospects improve -- if they ever do.

"This is not a great time to, let's say, repossess the Minneapolis Star Tribune ... and then try to turn around and sell it," said Rick Edmonds, media business analyst with the journalism think tank Poynter Institute.

The Star Tribune said Sept. 30 it skipped a $9 million quarterly debt payment to conserve cash. The next day, the investor group that owns The Philadelphia Inquirer and the Philadelphia Daily News skipped an unspecified interest payment in an apparent bid to force lenders to renegotiate.

The McClatchy Co., one of the largest U.S. newspaper chains and owner of The Sacramento Bee and The Miami Herald among other prominent papers, agreed last month to pay higher interest rates and put up more collateral.

http://biz.yahoo.com/ap/081013/apfn_newspapers_debt.html?.v=1