Sunday, May 01, 2011

Nearer My God to Thee: An update on the corporate crisis at Lee Enterprises (guest essay)

Note: this piece is an update to an earlier essay on Post-Star parent company Lee Enterprises.

by Mark Wilson

As it braces for the latest readership numbers from the Audit Bureau of Circulations to be published next week, Lee Enterprises—parent company of the Post-Star—is suddenly rethinking its plan to restructure all of its corporate debt. On April 11, Lee’s board of directors announced plans to issue junk bonds in an attempt to retire about $1 billion in bank loans and notes scheduled to come due a year from now. The bond issue would effectively extend the repayment deadline another five years while increasing the ultimate sum owed (to bond holders).

On Monday this week the company announced that it would give away shares of Lee stock (valued at just under $2 per share) to anyone willing to assume a fraction of their debt through the purchase of the bonds. The press release also took pains to point out that the bonds were to be backed by Lee’s property and assets.

The Wall Street Journal reported Wednesday that Lee, citing a weak demand for its bonds, was preparing to issue a smaller number of bonds and would seek to refinance the remainder of the debt. It would be the second refinancing of its debt obligations in two years.

Reaction to the company’s strategy and the resulting confusion—at least as gaged by the price of Lee stock—has not been good. From its initial price spike ($3.47) immediately following the April 11 announcement, the common stock price has dropped unrelentingly to a new 21-month low of $1.57 per share. An investor web site has compared the company to a sinking ship.

Meanwhile, over at poststar.com, Managing Editor Ken Tingley has continued the conversation (here and here) on the future of news gathering in Glens Falls, seemingly oblivious to the crippling debt that may well impair the corporate parent from investing in his newspaper’s future.

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