Post Scripts: Big newspapers tumble

As I recall in a magazine article a few years ago, the chief executive of the Journal Register Company, the publicly traded newspaper company, bragged about being such a skinflint that he checked the odometers in reporters’ vehicles to verify their expense reports. Even such penny-pinching was not enough to keep the company from facing a mounting debt burden now and the possibility of being delisted from the New York Stock Exchange.

In response, the Journal Register, whose flagship newspaper is The New Haven Register, has hired the investment bank Lazard as an advisor as it weighs a restructuring, according to those briefed on the matter. If the company were to seek bankruptcy protection, as some analysts said was possible, it would be the first in recent memory for a publicly-traded newspaper company,

John Morton, a longtime newspaper analyst said. "That will just add to the gloom and doom that has settled over the newspaper publishing business," he said. A spokesman for the newspaper declined to comment.

This development comes amid the broad upheaval for the newspaper industry as readers and advertisers continue to shift to the internet, and it also raises the prospect of a public newspaper company being owned by its creditors, like the case of the Journal Register, a consortium of banks that includes JP Morgan Chase and Deutsche Bank.

Journal Register’s troubles are more related to its debt load … about $625 million at the end of 2007 … than to secular changes in the banking business. Four years ago the company paid $415 million for several Michigan daily newspapers whose fortunes declined as automobile manufacturers in Detroit cut their advertising budgets.

"When the whole automotive market collapsed, their newspapers did as well," Mr. Morton said. "And they took on a lot of debt. This was a strictly a market-driven collapse."

While the company struggled to make its debt payments, its operating performance has declined. The Journal-Register reported earnings before interest, taxes, depreciation and amortization of $90 million last year, a figure that is expected to slip to $70 million this year, according to Wachovia Capitol Markets.

"This is the year that maybe those companies that are highly leveraged will not be able to make their debt payments and Journal Register could be the first," says Rick Edmonds, a media analyst at the Poynter Institute. On March 31, Journal Register was notified by the New York Stock Exchange that its share price had fallen too low and was at risk of delisting.

Journal Register owns 22 daily newspapers and over 300 non-dailies, mostly clustered in six areas in the northeast United States. The company, based in Yardley, Pa., went public in 1997 and was once owned by a New York investment firm. The company’s shares closed unchanged last Friday at 52 cents.

"Who would have thought that a relatively substantial public newspaper company would be at risk of bankruptcy?" Mr. Edwards relates to friends: " People are going to see this and say, who’s next?"

I can only add: "You guess is as good as mine."