How bankrupt US papers are coping

Over the past year several US newspaper groups have gone into Chapter 11 bankruptcy protection. So, asks Philip Stone, how are they faring? Then he provides the answers.

Tribune group: Still in a quagmire because the bondholders are going after its chairman and ceo, Sam Zell, demanding that the bankruptcy judge let them investigate his $8.2bn takeover in 2007, calling it a "fraudulent conveyance". So that has a way to go yet.

Star Tribune (Minneapolis): It has taken advantage of the protection to wring some $20m in cost savings from its unions, and it persuaded the newspaper's major secured creditors to swap $430m in debt for control of the company plus $100m of new debt. All going well, the paper will leave protection by the end of this month. Big loser is Avista Capital Partners. It will lose the $530m it paid for the paper in 2006.

Philadelphia Newspapers: Publisher Brian Tierney is fighting off a bid by creditors, who are owed $300m, to take over the group. He wants to give them some $67m in cash and property to settle the debt. They are not biting. Big day in court next week when the judge decides on ground rules for an auction between the two sides.

Sun-Times Media Group (Chicago): A possible white knight has appeared to take the company out of its misery: local businessman Jim Tyree. He has bid just $5m for the group and agreed to assume some $20m in liabilities. Given that the company was valued at around $310m it could turn out to be a good investment, but it ran up a $380m loss last year, and it has a $600m tax bill hanging around its neck.

Freedom Communications (California): It is the newest entrant to protection, having done so last week. Faces $770m debt, but has already done a deal with most of its lenders which would forgive about 58% of that debt, giving the lenders control while the current owners would end up with just 2%.

It seems to me that most of these companies have done well to shed so much debt. But can they generate enough revenue to prosper once they emerge from bankruptcy protection?

Well, according to one analyst, they can. Glenn Rogers argues that it may well be time to invest in US newspaper stocks, at least in the medium term.

He names, somewhat surprisingly, the New York Times company and Gannett. "Both are trading for about the same price, well down from their highs but well up from their lows," he writes. "Both companies have other assets beyond their core newspaper business." And both have cut costs dramatically.

He thinks they "are well-positioned to benefit from what I believe will be a gradual recovery in the advertising market in general over the next several months."

He also thinks they have done well in building up digital businesses. Sounds crazy, but maybe he is right.

Whatever the case, from their different perspectives, Stone and Rogers do offer rather optimistic viewpoints at a time of continuing gloom for newspaper publishers.

Sources: FollowTheMedia/Seeking Alpha

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