Four Papers’ Bankruptcies Result in 75% Debt Reduction

Papers exiting bankruptcy have shed 75% of their obligations to creditors, reports journalism vet and “Newsosaur” blogger Alan Mutter.

Mutter looked at four major newspaper publishers that recently emerged from Chapter 11: MediaNews, Minneapolis Star Tribune, Morris Publishing and Journal-Register.

Collectively, the foursome stiffed their lenders for $1.9 billion, or 74.5% of their outstanding debt. In most cases, lenders were persuaded to forgive a portion of the debt in exchange for an ongoing ownership stake in the companies, which will have value only if the companies can be sold somewhere down the line for more than they are worth today.

Mutter says the lower debt obligations will ease pressure on the companies, because their operating profits won’t be gouged by high interest payments to creditors. Those payments accounted for much of the cost-cutting in newsrooms in recent years, he adds. But journalists can’t rest easy just yet:

Neither pubishers, nor their employees, are out of the woods. The post-bankruptcy agreements struck between creditors and publishers call for all manner of stringent performance standards, not the least of which is exacting profit targets.

Mutter also discusses the prospects for five additional publications currently in some stage of bankruptcy, including Tribune Co., which owes a hefty $13 billion on its own.

(h/t Romenesko)