Lee Enterprises Inc., the owner of the St. Louis Post-Dispatch and 47 other daily U.S. newspapers, won permission to borrow as much as $20 million to help fund operations as it seeks court approval of a restructuring plan supported by creditors.
U.S. Bankruptcy Judge Kevin Gross granted Lee interim approval of the bankruptcy loan today in Wilmington, Delaware. The company is to return to court Jan. 6 for permission to borrow another $20 million.
Lee also scheduled a Jan. 23 hearing to seek approval of its pre-packaged plan.
The newspaper publisher acquired Pulitzer Inc. in 2005 to gain control of the Post-Dispatch. In addition to the 48 daily newspapers, Lee has 300 specialty publications and interests in four other dailies.
The company sought bankruptcy protection yesterday after waning demand for advertising led to a three-year decline in revenue and an out-of-court restructuring failed, according to court papers. Lee, based in Davenport, Iowa, listed $1.2 billion in assets and $1.3 billion in debt.
Lee has “overwhelming support” from its creditors and didn’t receive any votes rejecting the proposal to restructure about $1 billion in debt maturing in April 2012, Bojan Guzina, a lawyer for the company, told Gross at the hearing.
“It’s remarkable,” Gross said, “I know how hard everyone had to work to get that result.”
Under the reorganization plan, lenders, owed about $855.8 million, can convert all or a portion of their claims to get a share of a new $175 million second-lien facility and 15 percent of the reorganized company’s equity. The remainder of the lenders’ debt would be converted into a new $689.5 million secured term loan. The loans would mature in 2015.
Some of the lenders, including Goldman Sachs Lending Partners LLC, Mutual Quest Fund, Monarch Master Funding Ltd., Mudrick Distressed Opportunity Fund Global LP and Blackwell Partners LLC, already agreed to acquire as much as $166.3 million of the second-lien loan.
The holders of about $127.6 million of so-called Pulitzer notes will get new notes with maturity extended to 2015, according to the restructuring proposal. The company estimates that the notes will total about $126.4 million when issued.
The $40 million in bankruptcy financing would be converted into a revolving exit facility under the plan.
Equity holders won’t be wiped out, a typical outcome in most bankruptcies, and will retain their interests in the company, court paper show. Unsecured creditors will be unaffected by the restructuring as well.
Lee, founded in 1890, has a daily circulation of about 1.3 million, according to court documents. The company generated $756.1 million in operating revenue and reported an operating loss of $103.3 million for the year ended Sept. 25.
The case is In re Lee Enterprises Inc., 11-13918, U.S. Bankruptcy Court, District of Delaware (Wilmington).