Court Approves Newspaper Magnate Lee Enterprises’ Bankruptcy Plan
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Court Approves Newspaper Magnate Lee Enterprises’ Bankruptcy Plan

February 7, 2012


Lee Enterprises, which owns several U.S. newspapers, exited bankruptcy court this week less than two months after it announced its plans to reorganize its finances, according to a report from the St. Louis Post-Dispatch, which is owned by Lee Enterprises.

Lee Enterprises, owner of 48 daily newspapers and more than 300 special publications, filed for Chapter 11 bankruptcy in mid-December, and swiftly exited bankruptcy protection after the court approved its reorganization plan.

The company’s prepackaged reorganization plan, which is often allowed under U.S. corporate bankruptcy law, pushed back the date at which the company will have to repay its creditors.

However, in exchange for the postponement of its debts, Lee will eventually have to pay a significantly higher interest rate. Sources indicate that the interest rate for much of its debts jumped from 5.1 to 9.2 percent.

In addition to the heightened interest rates, some creditors also received ownership stakes in the company, with the most senior creditors receiving up to 13 percent ownership shares of Lee Enterprises.

Now, Lee faces the daunting task of increasing its advertising revenues at a time when newspapers across the country are bleeding cash due to decreased readership, and the desire of many advertisers to invest more in online advertising.

The company, however, remains optimistic about its chances for a financial revival, as it recently observed that Lee has outpaced the median advertising revenues in the newspaper industry for the last 33 financial quarters.

Such advertising success, however, did not help Lee stay out of bankruptcy court in the first place, and some observers are skeptical that the company will be able to vastly improve its revenue sources.

And, in addition to the company’s likely struggles in drumming up advertising revenue, the company also admits it will see a decline in readership in the coming years.

Representatives from Lee estimated in their bankruptcy filing that circulation would decrease by 2.5 percent by the end of 2012, and that circulation revenue would remain flat during the next few years.

Of course, despite the company’s long odds for financial success, bankruptcy did offer something that it gives many consumers: a fighting chance.

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