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Finance Finesse

GateHouse Turns to Ch. 11

Like other publishers, GateHouse has seen print advertising revenue decline as audiences move to the Internet and mobile devices

GateHouse Media Inc., which filed for bankruptcy protection on Sept. 27, is joining other publishers in order to institute a debt-for-equity swap. Fairport, N.Y.-based GateHouse has about $1.28 billion in debt. The company owns the Wicked Local group of websites in Massachusetts, publishes The Herald News, based in Fall River, Mass., and the Saugerties Post Star, based in Saugerties, N.Y., and many other publications.

GateHouse, like other publishers, has seen print advertising revenue decline as audiences move to the Internet and mobile devices.

The company suffered a net loss of about $12 million for the quarter ended June 30, compared to a $2.6 million net loss one year earlier. In the six-month period ended June 30, the company lost $31.6 million, compared to a $15.9 million loss for the same period of 2012.

If the restructuring works out as proposed, GateHouse's largest debt owner, NewCastle Investment Corp., will wind up owning the reorganized company. NewCastle owns about 52 percent of GateHouse's debt, and is offering to pick up the debt from other creditors for 40 percent of its face value. Debt holders have the option to accept the cash or receive stock in the reorganized company. As part of the bankruptcy plan, GateHouse would also merge its assets with the Dow Jones Local Media Group, a group of 33 publications that Newcastle bought in September for $87 million. GateHouse would attempt to raise a new $150 million debt facility for the reorganized company, but that loan is not a condition to the restructuring.

If GateHouse's restructuring is completed successfully with the prepackaged filing, Newcastle predicts that GateHouse's revenues could climb from about $475 million for fiscal year 2013 to $522 million for fiscal year 2016, according to a filing with the U.S. Securities and Exchange Commission.

GateHouse is just one of many publishers to seek bankruptcy protection to handle overwhelming debt. Reader's Digest parent, RDA Holdings Co. Inc., filed for bankruptcy protection in February with a plan to convert about $465 million in debt to equity to reduce its debt burden by about 80 percent.

In a slightly different strategy, an affiliate of the hedge fund that owned the Journal Register Co. acted as the stalking-horse bidder for the company to get rid of leftover debt from a previous bankruptcy case. The winning bidder, announced in March, was 21st CMH Acquisition Corp., an affiliate of funds managed by Alden Global Capital Ltd., which owned $152 million in Journal Register loans that it bought from the company's previous bankruptcy case.


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