December 15, 2008

Lee needs debt waiver to forestall default

Lee Enterprises, parent of the Journal Times, is between a rock and a hard place.

On Monday Lee announced it will delay filing its annual report until Dec. 29, while it seeks waivers from lenders. The newspaper chain owes approximately $1.3 billion from its 2005 purchase of Pulitzer newspapers, including the St. Louis Post-Dispatch.

Lee said it expects to make another $180 million write-down to equity, which would trigger the minimum net worth covenant in an agreement related to $306 million of its debt. Without a waiver, Lee would be in default on the debt -- and that would create a default condition in other debt.

Lee said that its accounting firm, KPMG, said that without the waiver it would have to include a paragraph in the annual report about the company's ability "to continue as a going concern." That, too, would trigger yet another default under Lee's bank credit agreement.

Lee's stock closed today at 39 cents per share, down from $49 per share at its high at the time of the Pulitzer purchase. The company's market cap, once over $2 billion, is down to $17.5 million.

Lee's statement is HERE.

Besides the Journal Times, Lee owns 48 other daily newspapers and 300 weeklies and specialty publications.

3 comments:

  1. I knew the pieces of that old fire station would still be coming down when the paper went belly up . . .

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  2. The following was published in the Business Journal.

    TAKE NOTE - KPMG'S STATEMENT IS STATING THE OBVIOUS - THE BUSINESS IS ON LIFE SUPPORT AND SHOULD THE VENTALATOR BE DISCONECTED OR NOT!

    Lee Enterprises Inc., parent of the St. Louis Post-Dispatch, said Monday that its independent accounting firm might raise a "concern" in the company's annual report about the publisher’s ability to continue.

    Such a modification of the report would, unless waived by the lenders, cause a default under Lee's bank credit agreement.


    Lee said it expects to write down at least $180 million in the fourth quarter. Unless lenders agree, the impairment charges would trigger a default on the $306 million in debt that Lee took on when it bought Pulitzer Inc. in 2005.

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