GateHouse Media Inc. has filed Chapter 11 and has plans to restructure its $1.2 billion debt. The company owns hundreds of local websites and more than 400 community newspapers. Newcastle Investment Corp. owns 52 percent of the company’s debt and plans to combine GateHouse’s media group with 33 other publications it purchased from News Corp. for $87 million. It plans to form New Media, a publicly traded company created from all the operations Newcastle spun off.
According to Newcastle, the newly formed company would benefit from cost cuts and digital revenue, and in over three years, it would be able to invest $1 billion to purchase more shopping publications and newspapers at a discount. The Chapter 11 bankruptcy came about after the 2008 financial crisis, when GateHouse became over leveraged. However, the past few years has revealed doubled digital revenue and a $150 million cut in costs. Although total revenue fell five percent for fiscal year 2012, digital revenue increased to almost 27 percent for the entire year.
Creditors are supporting the reorganization, and they have the option of cashing their stock at 40 cents on the dollar or converting their positions to stock in GateHouse. New Media is expected to emerge as a successful organization, and Newcastle will own a 59 percent interest in New Media that it estimates will be close to $230 million. New Media is expected to pay out cash dividends as a substantial portion of its cash flow.
Some businesses might struggle with mounting debt; however, a Chapter 11 bankruptcy affords the opportunity for them to reorganize in order to continue to be profitable. A skilled bankruptcy attorney might be able to help businesses get back on their feet by offering options and possible solutions, so their owners can make more educated decisions regarding the manner in which to proceed.
Source: ABC, “GateHouse Media Headed for Ch. 11, Then New Co.“, September 05, 2013by