MediaNews chairman Dean Singleton said in a statement that the company has reached a deal with its lenders for a streamlined reorganization process that should take about 60 days to complete. The plan will reduce the company's debt by $765 million, cutting it to $165 million.
Singleton assured employees that the bankruptcy would not affect jobs or benefits and said that none of the company's papers will be sold or shuttered. Since the bankruptcy will be handled through a separate holding company (called Affiliated Media), Singleton said the papers would experience business as usual.
From Singleton's statement:
In our search for a new model that reflects the realities of today’s changing newspaper environment, we have come up with a solution that restores financial strength and flexibility to our balance sheet. It does not affect the operations of any of our newspapers or vendors or other operations. It gives us one of the strongest balance sheets in the industry. It gives us breathing space to create a new model for the newspapers we publish.Here's some more detail from the Wall Street Journal:
MediaNews is the third newspaper company in Southern California to file for bankruptcy. Tribune Co., owner of the Los Angeles Times, filed for Chapter 11 in December 2008. Freedom Communications, which owns the Orange County Register, went bankrupt in September.
Under MediaNews' plan, senior lenders will swap debt for equity, helping reduce the company's debt load from about $930 million to $165 million. Bondholders will get warrants for possible future equity. People familiar with the transaction said the company has been valued at roughly $200 million, including about $50 million of equity value.
Hearst Corp., the owner of magazines and newspapers, has at least $400 million in equity and debt tied to MediaNews, and the investment will be wiped out by the bankruptcy filing, according to people familiar with the matter. A Hearst spokesman declined to comment.
"We have worked side-by-side with Hearst on this," Mr. Singleton said.
Mr. Singleton's ability to retain control over MediaNews represents a face-saving victory in the company's restructuring, and on Friday Mr. Singleton said he wanted to try to be the aggressor in merging newspapers.
Bankruptcies often result in board and management changes. Mr. Singleton, like many corporate executives, was sensitive to any negative fallout from a bankruptcy filing, according to people close to him.
MediaNews owns the Los Angeles Newspaper Group, which publishes the Los Angeles Daily News, Pasadena Star-News, Daily Breeze, San Bernardino Sun and five others, and the Bay Area News Group in Northern California.
(This post was updated with the WSJ story link.)