Another US publisher has collapsed, as the slump in revenues (and sales in some cases), cuts deeper into the fabric of the country’s once flourishing pint media.
The latest failure was Freedom Communications of California, which runs the state’s third largest newspaper (the Orange County Register), 30 other newspapers, had around 8200 staff and owned eight TV stations. It filed for bankruptcy protection on Tuesday night in what’s known as a “pre-packed” filing that will see debt and possibly staff cut and the owners lose all investment as the bank lenders take control.
Freedom Communications owed more than $US1 billion in debt, with between $US500 million and $US1 billion in assets.
Blackstone and Providence Equity Partners own approximately 45% of Freedom (Blackstone 25%, Providence, 18%). They bought this stake in a partial buyout in 2004 as the controlling Hoiles family split in half. One side sold to the private equity groups, the others hung on and look like losing all in the collapse. Freedom’s creditors are owed about $US780 million. Under the filing and re-organisation plan that debt looks like being cut in half to around $325 million, plus the various other creditors.
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The collapse of Freedom further undermines claims by private equity companies that they have a business model suited to running media companies (actually, any company). The high debt, cost slashing approach is completely inappropriate in the wake of the low interest rates and easy credit.
The reasons for the failures are easy to spot: too much debt taken on in a partial private equity buyout and/or the corrosive impact of the slump in print and online revenues, especially in the first half of 2009, as Crikey reported on Tuesday.
First half ad and online revenues were down more than 28% in the US and for a growing number of companies, that has broken their balance sheets. They can’t hang on for the tentative recovery to develop into something else.
The US Editor and Publisher website said Freedom was possibly the 10th group to collapse in the past year.
The biggest were the Tribune Co which went in December 2008 with an estimated $US13 billion. Readers Digest in the US fell over last month. The Sun Times Co in Chicago is in bankruptcy as is The Minneapolis Star Tribune, Philadelphia Newspapers, and the Journal Register Co., publisher of 20 daily newspapers and more than 180 non-daily publications.
The 100-year-old Christian Science Monitor went online-only earlier this year and two major dailies, the Rocky Mountain News of Denver, Colorado, and the Seattle Post-Intelligencer, have shut down in recent months and gone on line. A paper in Tucson, Arizona closed earlier this year by its owners, the Gannet chain, (owners of USA Today).
The Southeast Missourian newspaper will suspend publication of its Saturday print edition in order to better manage its costs; the Detroit News is not making home deliveries on some days. The small Eagle Times in the US state of New Hampshire closed in July. As well, Young Broadcasting, the owner of 10 TV stations, failed earlier this year.