GateHouse Media Inc., owner of The News Eagle, has filed for voluntary chapter 11 bankruptcy in the U.S. Bankruptcy Court for Delaware.
GateHouse announced on Sept. 11 that it had entered into an agreement with some secured lenders, including GateHouse affiliates, to restructure $1.2 billion of debt scheduled to come due in August 2014.
According to Michael Reed, director and chief executive officer, the bankruptcy filing for prepackaged reorganization was a strategic decision.
"We have complied with and are current with all of our obligations," Reed said. "But with the challenges facing our industry and the impending maturity of our secured debt next year, we needed to be proactive in exploring options to restructure our debt, recapitalize and position ourselves for future growth."
The prepackaged plan proposes a "balance-sheet restructuring" that will allow GateHouse to emerge from bankruptcy with less debt on its balance sheet, but with its business operations intact, Reed said.
"Once GateHouse has emerged from bankruptcy, we will be under common ownership with Local Media Group, a company with a strong community media presence and performance that operates eight daily community newspapers and 13 weeklies," Reed said. "Joining with Local Media Group will be an important step in growing our business and will contribute to our future success."
Pension, trade and all other unsecured creditors of GateHouse would not be affected under the plan. GateHouse's common stock would be canceled under the plan, and holders of secured debt would have the option of receiving a cash distribution of 40 percent of their claims or stock in New Media Investment Group Inc., a new holding company that will own GateHouse and Local Media Group.
GateHouse, which operates in 330 markets across 21 states, is one of the largest publishers of locally based print and online media in the United States as measured by number of daily publications.
The company said it intends to continue day-to-day operations under the jurisdiction of the bankruptcy court. According to Reed, GateHouse has sufficient cash to operate during the chapter 11 process and does not need debtor-in-possession financing.
"We don't believe our customers, vendors or employees will notice any change in our day-to-day operations as a result of the bankruptcy," he said. "From an operational standpoint, it's business as usual."