Newspaper Bankruptcy Watch: Lee Enterprises

Lee Enterprises, the nation’s fourth biggest newspaper chain, has been granted a last-minute stay of execution. The new execution date is April 28, 2012, when Lee will owe principal payments of $721m, plus interest.

To put this number into context for you, if Lee sold off all its printing plants, buildings and equipment, and liquidated all its inventory to satisfy its creditors, it would still be $400m short. Stil, Lee thinks it can somehow gut it out. Its sees its enormous problems as temporary, so the party continues!

Lee’s most pressing concern was a $306m balloon payment due to institutional investors in April.  The newspaper company was hit hard by the fall in ad revenues and so bloated with debt that it didn’t have enough cash to pay.  But rather than force Lee into bankruptcy, the lenders have given Lee a three-year reprieve:

Lee today repaid $120 million of the principal amount of its $306 million Pulitzer Notes debt due in April 2009 using a portion of its restricted cash, which totaled $129.8 million at Dec. 28, 2008. The remaining debt balance of $186 million has been refinanced by the existing lenders until April 28, 2012. Under the agreement, $9 million of restricted cash was retained to facilitate the liquidity of the operations of Pulitzer Inc., a wholly owned subsidiary of Lee, and its subsidiaries.

But like a good loan shark, the lenders are going to wring extra dollars out of Lee. Beginning in June, it must pay its lenders $4m every quarter. In October 2010, it will pay a total of $8m cash. Plus the interest rates on the Pulitzer Notes will rise from 8.05 percent to 9.05 percent next year, ultimately increasing to 10.05 percent ($19m) by 2012.

Lee also owes $1.1b amount to the bank, who make concessions to allow the company to survive. Lee owes the bank principal payments totaling $234m over the next three years. Payments at maturity will increase $80m to $535m due April 2012.

Escaping the hangman’s noose wasn’t cheap, by the way. Refinancing this whole mess cost Lee $20m.

Abandon all hope, ye who enter here.

China's financial war chest goes shopping

Via Bloomberg:

China entered into an oil-for-loans accord with Brazil yesterday — its third such deal in three days — tapping the nation’s $1.95 trillion foreign-exchange reserves at a time when credit is scarce. In all, the world’s second-largest oil user will get about 600,000 barrels a day, equal to 17 percent of its imports last year, in return for providing $39 billion of loans….

  • China agreed on Feb. 17 to provide Russia with $25 billion of loans in return for 300,000 barrels a day of oil for 20 years.
  • Venezuela’s Petroleos de Venezuela, known as PDVSA, will provide 200,000 barrels a day to the Asian country to pay down a $4 billion loan from China Development Bank. Venezuela’s oil is “at the service of China,” President Hugo Chavez said Feb. 18.
  • Chinese President Hu Jintao visited Saudi Arabia Feb. 10-12. A deal between China Petroleum & Chemical Corp., Asia’s biggest oil processor, and Saudi Aramco is expected.
  • Chinalco, the Aluminum Corporation of China, plans to invest $30 billion into Australian mining giant Rio Tinto to back up its initial $11 billion stake made in 2007. Rio Tinto is three times the size of Chinalco.
  • China Minmetals placed and the $2.6 billion bid for troubled Australian mining company OZ Minerals. “If China wasn’t there, I don’t know where we would be … what’s the alternative?” said OZ Minerals chief executive Andrew Michelmore.
  • In Feburary 2007, Chinalco bought Peru’s Mount Tomorocho, the world’s most productive copper mine.

The history of the future is being written here.

Brother, can you spare a jet?

Orders for new aircraft are down, so the private jet industry has decided to launch a PR offensive to counter all the bad press it’s been getting over auto executives who flew private planes to beg for billions of dollars in government handouts. The message: “No plane, no gain.”

Lo and behold, two financial columnists expressed strikingly similar views on the subject this week.

Here’s Ben Stein’s take:

Then, once the attendees get to the meetings, they have to get up very early each day, hear speeches from experts in their fields, take notes, have seminars about their notes, hear more speeches, and meet new people to do more business. Then, exhausted from a very long day, they are offered the chance to play golf — and my experience is that most of them are far too tired to do so.

Waking up early, meeting people, attending seminars, hearing speeches and taking notes! How do they manage it all? Tired is the head that wears the crown.

Members of Congress, who love to catch a ride home on a contributor’s private plane, are helping out too. Just a few months after scolding auto executives for flying to Washington, Congress approved tax breaks to help those executives buy more planes.

Meanwhile, tongue firmly in cheek, JetBlue is welcoming bigwigs.

We understand it’s not easy being a high flyer these days. The CFO is picking apart your expense reports. Congress is mad about your bonus. And you can’t even hop on a private jet to the Cayman Islands without freaking out the shareholders. But even this economic cloud has a silver lining… actually more of a bluish lining. Because now you get to try JetBlue.

Welcome aboard. Um, do you mind switching seats?

Newspaper Bankruptcy Watch: Lee Enterprises

I’ve written before about the woes at Lee Enterprises, the nation’s fourth biggest newspaper chain, which has been teetering on the edge of bankruptcy.

Editor & Publisher reports today that not everyone has lost faith in Lee:

The California State Teachers Retirement System (CalSTRS) is not only jumping into LEE, it owns more than a 5% stake. Its approximately 2.01 shares are 5.16% of shares outstanding. A Lee spokesman confirms CalSTRS seems to be a new holder, and the SEC shows no similar filing going back more than a year.

I’ve been pretty down on Lee, but this gave me some second thoughts. CalSTRS is the second largest pension fund in the United States, with $129 billion in assets at the beginning of the year.

There’s  still an enormous amount of pessimism on Lee Enterprises. The shares are trading around 25 cents and a quarter of the float (shares available) are being shorted. So what does CalSTRS know that the street doesn’t?