Lee refinances its $306 million debt payment

Lee Enterprises, parent of the Racine Journal Times, has wiggled out from under the most onerous of its debt covenants and appears likely to survive until another day.

The company paid off $120 million of the $306 million due this April from its 2005 purchase of Pulitzer newspapers, and refinanced the remaining $186 million until April 2012. The company will make $4 million payments quarterly, up to another $4.5 million payment in October 2010, and agreed to an interest rate increase from 8.05% to 9.05% until April 2010, and another .5% after that.

Lee also significantly reduced its annual payments on the rest of its $1.1 billion bank debt -- at least until the debt matures in 2012. At that point, "Payments at maturity will increase to $502.5 million from $83.1 million." Yikes! The cost of reaching this agreement -- financing costs, professional and advisory fees and what have you -- are listed at $20 million, and will be added to what Lee already owes. (I'm guessing that $20 million would nicely cover the JT's newsroom salaries for well more than a decade...)

Journal Times' publisher gives the good news to readers
Publisher of Lee's Billings Gazette uses the same words!

Mary Junck, Lee chairman and chief executive officer, said, "Although significant economic challenges continue, we have stayed focused on protecting our long-term growth. Even in this unprecedented downturn, we remain, by far, the leading provider of local news, information and advertising in our markets. Our strength in print continues to be vast and stable, and our online reach continues to grow."

Lee's stock price jumped 13.7% today (OK, that's only a gain of 4 cents), closing at 33 cents per share. Most of the increase came before the debt agreement announcement. Hmmm...

All the bloody details here.

Lee has taken other action this year as well, including layoffs, mandatory employee furloughs, a pay freeze, benefit cuts and a shrinking page. On March 10 the company is expected to adopt a reverse stock split, in an effort to get its stock price back over $1, a necessity if it is to remain listed on the New York Stock Exchange. NYSE also requires a market cap of $25 million (reduced through April to $15 million). At 33 cents a share, Lee still falls a bit short of the temporary market cap total, but the real target has to be $25 million -- a large jump in price indeed. After the close Thursday, as the impact of its debt agreement spread, Lee climbed another 6 cents per share.