The Journal Register Company (The New Haven Register and The Trentonian) has again filed for bankruptcy protection (9/5) and is looking for a quick sale, said Digital First Media, which operates the company along with the MediaNews Group.
The Chapter 11 filing comes three years after Journal Register emerged from a prior bankruptcy case.
Digital First Media says it expects normal operations to continue during the sales process. Journal Register would be sold at auction, it said, and had signed a stalking horse bid from an affiliate of Alden Global Capital.
Digital First CEO John Paton, said Journal Register had more than doubled its digital audience in the last two years. But he said the company was still struggling with print advertising and legacy costs.
In making the announcement, he sent an e-mail to the staff:
Today Digital First Media announced Journal Register Company has filed
for Chapter 11 bankruptcy and will seek to implement a prompt sale.
We expect the auction and sale process to take about 90 days, and I am
pleased to tell you the company has a signed stalking horse bid for
Journal Register Company from 21st CMH Acquisition Company, an affiliate
of funds managed by Alden Global Capital L.L.C.
So why file Chapter 11?
The company exited the 2009 restructuring with approximately $225
million in debt and with a legacy cost structure, which includes
leases, defined benefit pensions and other liabilities that are now
unsustainable and threaten the company’s efforts for a successful
digital transformation.
From 2009 through 2011, digital revenue grew 235 percent and digital audience
more than doubled at Journal Register Company. So far this year,
digital revenue is up 32.5 percent. Expenses by year’s end will be down more
than 9.7 percent compared to 2009.
At the same time, as total expenses were down overall, the Company has
invested heavily in digital with digital expenses up 151 percent since 2009.
Journal Register Company has and will continue to invest in the
future.
But also from 2009 to 2011 Journal Register Company’s print
advertising revenue declined 19 percent and print advertising represents more
than half of the company’s revenues. Print advertising for the
newspaper industry declined approximately 17 percent over the same time
period, according to the Newspaper Association of America. As well,
both print circulation and circulation revenue have also declined over
the same time period.
Since 2009, printing facilities have been reduced from 14 to 6; 9 of
the 50 owned facilities have been sold and 8 distribution centers have
been outsourced.
During the same time period, debt was reduced by 28 percent with the company
currently servicing in excess of $160 million of debt.
All of the digital initiatives and expense efforts are consistent with
the company’s Digital First strategy and while the Journal Register
Company cannot afford to halt its investments in its digital future it
can now no longer afford the legacy obligations incurred in the past.
Many of those obligations, such as leases, were entered into in the
past when revenues, at their peak, were nearly twice as big as they
are today and are no longer sustainable. Revenues in 2005 were about
two times bigger than projected 2012 revenues. Defined Benefit Pension
underfunding liabilities have grown 52 percent since 2009.
After a lot of thought, the board of directors concluded a Chapter 11
filing was the best course of action.
Journal Register Company’s filing will have no impact on the
day-to-day operation of Journal Register Company, Digital First Media
or MediaNews Group during the sale process. They will continue to
operate their business and roll out new initiatives.
If you have questions just ask you know how to reach me.
I know this announcement will leave you with questions ask. Your
managers, I and any member of senior leadership at Digital First Media
will be available to answer.
And while I get this news may make some of you nervous, don’t let it.
Concentrate on the job at hand and we will work through this. This
really is the right decision for Journal Register Company.
