Digital First Media, which operates the New Haven Register and several other news organizations, has filed for Chapter 11 bankruptcy in U.S. Bankruptcy Court for the Southern District of New York.
The parent company says it is seeking a "prompt sale" and that the Journal Register Company will continue normal business operations during the proceedings. "Offices, newsrooms, sales teams and publishing continue working. Employees are paid and goods and services purchased after the filing date are paid for in the ordinary course of business," the parent company said in a prepared release.
The company says it has a "a signed stalking horse bid" for the Journal Register Company from 21st CMH Acquisition Co., an affiliate of funds managed by Alden Global Capital LLC.
The Wall Street Journal reports this is the second time in three years that the Journal Register Company has sought bankruptcy protection and that Alden Global Capital is the company's single largest shareholder and creditor:
In its bankruptcy petition, Journal Register reported assets and debts each in the range of $100 million to $500 million. The company operates 18 daily newspapers clustered around cities including Detroit, Philadelphia and Cleveland. It said its multi-platform products--websites, video and print ventures that number more than 350—reach an audience of 21 million Americans monthly.
To read more, please see The Wall Street Journal story online.
The New Haven Register covers New Haven, Branford, and other shoreline towns. The Journal Register company also owns the Shoreline Times of Guilford, Middletown Press of Middletown, the Register Ctitizen of Torrington, and Connecticut Magazine. Here is a list of its properties on Wikipedia.
"The Journal-Register Company is deploying bankruptcy as a tool to clear away the debt and debris of the collapse of the age of print to make itself more appealing to suitors as a digital-only company," said Rich Hanley, associate professor and director of the graduate journalism program at Quinnipiac University in Hamden, in the Courant. See the full Courant article for more details.
Here is the full press release from Digital First Media:
Digital First Media Announces Journal Register Company Files for Chapter 11
New York, NY (September 5, 2012) – Digital First Media, which operates MediaNews Group, Journal Register Company and Digital First Ventures, today announced that Journal Register Company filed voluntary petitions for Chapter 11 bankruptcy in U.S. Bankruptcy Court for the Southern District of New York and will seek to implement a prompt sale.
“We expect the auction and sale process to take about 90 days, and we are pleased to announce the Company has a signed stalking horse bid for Journal Register Company from 21st CMH Acquisition Co., an affiliate of funds managed by Alden Global Capital LLC,” said John Paton, Chief Executive Officer of Digital First Media.
The filing enables Journal Register Company to continue normal business operations during the sale process.
“The Journal Register Company has made solid progress in its digital transformation in the last two years more than doubling its digital audience with 235% digital revenue growth from 2009 to 2011,” said Mr. Paton. “But that transformation is threatened by a decline in print advertising revenue – the Company’s largest revenue source – and legacy costs incurred when Journal Register Company’s total revenues were nearly twice the size it is today. Since 2009 the Company’s pension liabilities grew 52%.”
“Journal Register Company has reduced its overall costs by about 10% while increasing its digital investment by 151% and reduced its debt by 28% from a height of $225 million in 2009,” Mr. Paton said. “However, from 2009-2011 print advertising declined 19% and print is more than half of Journal Register Company’s total revenue.” Print advertising for the newspaper industry declined about 17% over the same time period, according to the Newspaper Association of America. Mr. Paton said Journal Register Company circulation print volume and revenues also shrank over the same period.
“After much consideration, the Board of Directors concluded a Chapter 11 filing was the best course of action for Journal Register Company,” Mr. Paton said. “As difficult as they are, the steps we announced today are steps that will ensure the Company’s future.”
1. What Is Chapter 11 Bankruptcy?
A company that files for protection under Chapter 11 is allowed to continue to operate and maintain its business “in the ordinary course.” A Chapter 11 filing gives a company time to restructure its liabilities while preventing anyone from taking action until the process is complete. In our case, Chapter 11 will allow the Company to address our unsustainable legacy cost infrastructure including debt, leases, defined benefit pensions and other liabilities.
2. What’s A Bankruptcy Sale:
A bankruptcy sale includes a court supervised public auction whereby the current bid by 21st CMH Acquisition Co., an affiliate of funds managed by Alden Global Capital LLC, is subject to higher or better offers, if any, from potential competing bidders. The winner can decide which assets it wishes to buy “free and clear” of claims except those the buyer expressly agrees to assume. At this time, we have a signed purchase contract with 21st CMH Acquisition Co., to buy substantially all of the company’s assets, and we are marketing the company to see if other parties might be interested in bidding.
3. So What Happens Now?
During the sale process, daily operations continue with management remaining in place, and new initiatives and growth plans continue.
Offices, newsrooms, sales teams and publishing continue working. Employees are paid and goods and services purchased after the filing date are paid for in the ordinary course of business.
An “automatic stay” is in place which prevents anyone from collecting debts owed by the Company, such as loan payments it would ordinarily make to the bank or payments to vendors for merchandise received before the filing.
4. What Happens To My Job After The Sale Is Complete?
That decision will be made by the ultimate purchaser. As always, the best way to secure our jobs is to keep doing a great job.
5. Journal Register Company Went Through Bankruptcy in 2009. Why Is This Happening Again?
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% and digital audience more than doubled at Journal Register Company. So far this year, digital revenue is up 32.5%. Expenses by year’s end will be down more than 9.7% 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% 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% and print advertising represents more than half of the Company’s revenues. Print advertising for the newspaper industry declined approximately 17% over the same time period, according to the Newspaper Association of America.
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% 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% since 2009.
After a lot of thought, the Board of Directors concluded a Chapter 11 filing was the best course of action.
6. How Does This Affect Our Day-To-Day Operations?
During the sale process, we will continue to operate as usual. Our management will be unchanged. Our operations will remain the same and we will ensure that our business continues in the ordinary course.
7. How Long Will This Take?
It’s impossible to predict how long this process will take, but we anticipate the auction and approval of sale will take place in the next 90 days. Company management will keep you informed of the progress.
8. Are There Any Changes In Company Management?
No. John Paton is the Chief Executive Officer and Jeff Bairstow is the President. There is no impact or change in the Company’s leadership.
9. In the 2009 bankruptcy senior managers received bonuses for leading the Company through that process. Will senior managers receive bonuses this time?
No. All senior managers, including CEO John Paton and President Jeff Bairstow, will not accept any bonuses or enhanced compensation or salaries related to the restructuring process.
10. How Will This Affect Employees?
During the sale process, there won’t be any changes to salaries, paychecks, insurance or expense reimbursement. Paychecks will be issued on the same schedule the Company has always used.
Expense reimbursements will follow the usual schedule and process, and there will be no impact on employee health insurance.
11. How Will Employees Be Kept Informed About Our Progress?
In the past few years the Company has taken great strides to open up communication within Journal Register Company. Many of you email our CEO John Paton and President Jeff Bairstow directly. You should feel free to continue to do that. Management will be completely available to answer any of your questions.
Also, we will communicate important steps in this process directly with you, through email, or in group meetings.
About Digital First Media
Digital First Media (www.DigitalFirstMedia.com) is headquartered in New York City and jointly manages MediaNews Group and Journal Register Company. Digital First Media reaches 61.5 million Americans each month through more than 800 multi-platform products across 18 states.
About Journal Register Company
Journal Register Company is a leader in local news and information in 10 states. The Company’s more than 350 multi-platform products reach an audience of 21 million people each month. For more information visit the Company website at www.JournalRegister.com.
About MediaNews Group, Inc.
MediaNews Group, Inc. (www.medianewsgroup.com) is the nation’s second largest newspaper company as measured by circulation, with headquarters in Denver, Colorado. MediaNews Group and its affiliated companies publish 57 daily newspapers and more than 100 non-daily publications in 11 states.
About Digital First Ventures
Digital First Ventures (DFV) is focused on helping media entrepreneurs incubate, accelerate and validate their start-up companies in the news, content, sales and audience development space. As a division of Digital First Media – which operates more than 800 media products serving 61.5 million customers each month and annual revenues of more than $1.4 billion – DFV is ideally suited to accelerate value creation for media start-ups.
For more information contact:
Vice President Media Relations & Employee Communications
Digital First Media