Lee Enterprises files Chapter 11


Newspaper group owner (and former TV group owner) Lee Enterprises told shareholders earlier this month that it would file a prepackaged Chapter 11 bankruptcy petition as part of a refinancing deal with its creditors. That Chapter 11 filing is now a reality.

Lee cut a deal with its senior lenders in September to amend and extend its bank debt, consisting of a first lien term loan of $689.5 million, a $40 million revolver and a second lien term loan of $175 million.

Under the refi deal, Lee was required to also refinance the remaining $138 million of its Pulitzer Notes. Lee greatly expanded in 2005 when it acquired Pulitzer Inc. and its 14 daily newspapers for $1.46 billion in cash and debt assumption.

Market conditions, however, were not favorable, so Lee was unable to arrange a refinancing of the Pulitzer Notes on acceptable terms. Instead, Lee chose to seek an amendment of the current agreement with existing creditors. Under the new agreement, the Pulitzer Notes will carry an interest rate of 10.55%, increasing 0.75% in January 2013 and each year thereafter. After adjustment for principal payments and non-cash fees to be paid to noteholders, the amended Pulitzer Notes will have a balance of $126.4 million at the closing of the transaction. Not all of the creditors were onboard with the move, so the company had to go the bankruptcy court route.

“As we previously noted as a possibility, implementation will require a favorable, voluntary, prepackaged Chapter 11 process to bind the remaining minority of non-consenting lenders to the terms of the agreements. While such a filing falls under bankruptcy laws, in our case it differs significantly from most such filings because it preserves interests of stockholders and all other parties. The process will simply provide a favorable legal framework for implementing the agreements,” said Lee CEO Mary Junck in a recent letter to shareholders.

Under the prepackaged bankruptcy plan shareholders will be diluted only 13%. The company says the refinancing and its strong cash flow will “keep lee on solid financial footing.” The company’s stock continues to trade on the NYSE as “LEE.”

Lee’s stock fell Monday after the Chapter 11 filing was announced, but it remained well above its 52-week low of 49 cents.

No doubt a number of RBR-TVBR readers used to work for Lee. The company once owned a dozen TV stations, which it sold off more than 10 years ago, with the largest group, eight stations, being sold to Emmis in 2000 for $560 million.

RBR-TVBR observation: Talk about bad timing. Lee’s deal to buy the Pulitzer newspapers for nearly $1.5 billion was in 2005 – the last year that the US newspaper business saw a revenue increase.