GateHouse Files for Bankruptcy as Part of Fortress PlanSophia Pearson and Tiffany Kary
GateHouse Media Inc., the community newspaper publisher overseen by the co-chairman of Fortress Investment Group LLC, filed for bankruptcy after creditors approved a plan to combine its assets with those recently purchased by Newcastle Investment Corp.
GateHouse, based in Fairport, New York, listed assets of $433.7 million and debt of $1.3 billion in a Chapter 11 petition filed today in U.S. Bankruptcy Court in Wilmington, Delaware.
“We have complied with and are current with all our obligations,” Chief Executive Officer Michael Reed said in a statement today. “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 restructuring plan hinges on the combination of GateHouse with assets of Dow Jones Local Media Group, which Newcastle bought from News Corp. this month for $87 million.
Newcastle has made “two investments in high-yielding local media companies that will be combined and spun into a new company,” Wesley Edens, co-chairman of Fortress, said on a conference call Sept. 4, the same day Newcastle announced the deal for Dow Jones Local.
Dow Jones Local owns 33 publications, including Oregon’s Ashland Daily Tidings and the Cape Cod Times of Massachusetts. Its operations will be managed by GateHouse, Newcastle said in a statement.
Newcastle owns 52 percent of GateHouse’s $1.2 billion in secured debt and said it will convert the debt into equity in a new company. Other secured creditors will have the option of converting their debt into cash at 40 percent of par or stock in New Media Investment Group Inc., a new holding company that will own GateHouse and Local Media Group, GateHouse said in its statement today.
“The prepackaged plan proposes a ‘balance-sheet restructuring,’ by which GateHouse will emerge from bankruptcy with much less debt on its balance sheet, but with its business operations completely intact,” Reed said in the statement.
GateHouse has enough cash to operate in bankruptcy and doesn’t need or plan to obtain debtor-in-possession financing, Reed said. Kruger Inc., a Montreal-based pulp-and-paper producer, is listed as GateHouse’s largest unsecured creditor with a $1.2 million claim.
GateHouse’s 78 daily newspapers serve 10 million people in 21 states, according to the company’s website. It also owns 91 advertising-only “shoppers,” 235 weekly newspapers, 350 locally focused websites and six yellow-page directories.
GateHouse merged with a Fortress unit, FIF III Liberty Acquisitions LLC, in 2005, according to regulatory filings.
Other newspaper companies have entered bankruptcy as the shift among readers to online media has cut circulation and depleted classified advertising revenue. Tribune Co., Journal Register Co., Philadelphia Newspapers LLC and Minneapolis Star Tribune all have sought court protection since 2008.
The case is GateHouse Media Inc., 13-bk-12503, U.S. Bankruptcy Court, District of Delaware (Wilmington).