GateHouse Media files for pre-packaged Chapter 11


Financier Worldwide Magazine

November 2013 Issue

November 2013 Issue

GateHouse Media Inc, a company which owns hundreds of small and mid-sized community and weekly newspapers across the US, filed for Chapter 11 bankruptcy protection in late September after the company’s creditors overwhelmingly approved its restructuring plan. According to GateHouse, the restructuring plan was accepted by the only impaired class of creditors entitled to vote on it. Seventy-nine of the 80 holders of secured debt entitled to vote accepted the plan. GateHouse noted that none of its creditors voted to reject the plan. 

Under the terms of the plan, Newcastle Investment Corp, which owns 52 percent of GateHouse’s outstanding secured debt, will combine GateHouse’s media holdings with a number of Dow Jones Local Media publications it recently bought from News Corp. Newcastle will then issue stock in a new publicly traded holding company called New Media Investment Group. At that point, any holders of GateHouse secured debt will have the option of taking stock in the new company or cash at 40 cents on the dollar. 

In the company’s insolvency paperwork, filed at the US bankruptcy court in Delaware, GateHouse listed assets of $433.7m and liabilities of around $1.3bn. GateHouse’s bankruptcy filing will allow the company to restructure the majority of its debts which are scheduled to come due in August 2014. The majority of GateHouse’s debt was assumed by the publisher in 2007. 

GateHouse filed the outline of its restructuring plan with the US Securities and Exchange Commission (SEC) on 11 September as it sought to collect lenders’ votes in support of the scheme. The company noted in the outline that it would file for Chapter 11 protection and seek court approval to carry out its restructuring plan once it had secured the requisite number of votes for its plan. “We have complied with and are current with all our obligations,” GateHouse’s chief executive Michael Reed said in a statement. “With the challenges facing our industry and the impending maturity of our secured debt next year, we needed to be proactive in exploring options to restructure our debt, recapitalise, and position ourselves for future growth.” 

GateHouse, which operates in 330 markets across 21 states, has stated that it intends to continue operating its business without interruption as a debtor-in-possession under the jurisdiction of the Delaware bankruptcy court. According to Mr Reed, the company has sufficient cash to operate throughout the Chapter 11 process and does not need, nor does it intend to obtain, debtor-in-possession financing. 

GateHouse’s bankruptcy plan proposes a balance-sheet restructuring which will allow the company to emerge from bankruptcy with considerably less debt on its balance sheet, and with its business operations intact. The company does not expect any of its employees, vendors or customers to see any changes in day-to-day operations. 

In its court filing, GateHouse noted that it aims to raise around $150m in new debt in connection with the company’s restructuring. 

GateHouse − which was created by the Fortress Investment Group in 2005 when Fortress Investment purchased the company’s predecessor, Liberty Group Publishing − has endured a troubled history almost since its inception. The company’s debt ballooned from around $300m in 2005 to $1.2bn in 2013. Despite cutting costs by $150m over the past four years, the company still lost nearly $30m in 2012. GateHouse has never made an annual profit as a public company, and since the end of 2007, the company has been forced to reduce its workforce by more than 40 percent. According to company filings with the SEC, GateHouse now employs just over 4100, down from a peak of around 7200.

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Richard Summerfield

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