American media companies are falling like flies, almost at the rate of American banks.

Last weekend saw two largeish US media companies fail and go into bankruptcy, and yesterday we saw the fourth US newspaper or TV group to seek bankruptcy protection since the start of last December. This morning there’s a fifth and its one of the more important players.

The owners of the Philadelphia Inquirer took the company into Chapter 11 late on Sunday night with debts of $US390 million. It came a day after the Journal register filed for protection with over $US700 million in debt.

Philadelphia Newspapers was formed in 2006 for the $US562m bid by local investors for the Inquirer and its tabloid stablemate, the Philadelphia Daily News.

The company says operations of Philadelphia Newspapers remained “sound and profitable”, and would produce adjusted earnings before interest, tax, depreciation and amortisation of more than $25m this year, down from about $36m in 2008.

But debt is too high, as it was in all other filings so far, starting with the largest of them all, the collapse of the huge Tribune Co in Chicago with almost $US13 billion owing.

When the credit crunch erupted and eventually triggered the worst recession in 60 years, especially in the heavy advertising car industry, all media outlets were hurt; especially local Free To Air TV stations owned by the likes of News Corp, ABC, CBS and NBC.

Now the failures are rapidly emerging.

The Philadelphia-based Journal Register Co sought Chapter 11 bankruptcy protection on Saturday, citing declining advertising revenue and the heavy debt load.

It follows the collapse in early December last year of the huge Tribune Co which could result in losses of more than $US6 billion. It had debts of $US12.9 billion at the time of its failure. It had a string of papers in Chicago and Los Angeles, plus 23 TV stations and other investments.

Last week Young Broadcasting, a US regional TV broadcaster with 10 stations, went into Chapter 11 owing hundreds of millions of dollars.

In January the Star Tribune Co in Minneapolis went bust and filed for Chapter 11 bankruptcy protection. It was owned by a private equity group.

According to ratings agencies, only three US newspaper companies have investment grade ratings of B or better. They are the Washington Post Co, EW Scripps and Gannett. News Corp is not considered to be a US newspaper company, even though it’s acquisition of the Wall Street Journal made it a major player.

Publishers MediaNews and Morris Publishing are now rated at under investment grade, while McClatchy’s rating is down in junk territory, according to Standard & Poor’s and it looks like the next candidate to go into Chapter 11.

If The New York Times Co can’t meet this $US400 million repayment in May, it might follow. By the end of the March quarter, the Times Co board will know whether it has enough cash to meet the payment and keep the company operating.

Australia’s Fairfax might have declared lower earnings and lower profits (on an underlying basis) yesterday, but it is still in better shape than these US groups. American bankruptcy law allows for a brutal financial diet to be imposed on the company: all contracts and labour agreements get torn up and revamped under court direction. Shareholders and creditors have to take haircuts.

Just imagine what the current management of Fairfax would be able to do with that sort of freedom.

Peter Fray

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