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Another newspaper firm needs protection

THE owner of The Philadelphia Inquirer and Philadelphia Daily News filed for bankruptcy protection yesterday in an effort to restructure its debt load.

Philadelphia Newspapers Inc is the second newspaper company in two days, and the fourth in recent months, to seek bankruptcy protection.

"This restructuring is focused solely on our debt, not our operations," Chief Executive Brian P. Tierney said in a statement. "Our operations are sound and profitable."

The filing indicated that the company has between US$100 million and US$500 million in assets. In a statement posted on its Website yesterday, the company said that it has a debt load of US$390 million.

The company said that it will continue the normal operations of its newspapers, magazines and online businesses without interruption during the debt-restructuring process.

The filing is the latest blow to newspapers. The Journal Register Co filed for bankruptcy on Saturday. The Chicago-based Tribune Co sought bankruptcy protection in December and The Star Tribune of Minneapolis followed suit last month.

Tierney said that the company's goal was to bring its debt in line with "the realities of the current economic and business conditions."

The filings reiterate that the newspaper company hopes to reconfigure its debt rather than restructure its operations. The company was profitable by one accounting measure last year, earning US$36 million before interest, taxes, depreciation and amortization, and excluding one-time items. That figure is expected to be at least US$25 million in 2009.

Debtor financing

Tierney said in his statement that, in conjunction with its filing, the company is seeking court approval of up to US$25 million in debtor-in-possession financing. The proposed DIP financing, plus the cash flow from operations, will ensure the company's ability to satisfy obligations associated with its normal course of business, including wages and benefits, as well as payment of post-petition obligations to vendors under existing terms.

The company has long sought to offset declines in advertising revenue and circulation with money-saving moves, including sharing editorial functions of the two papers' newsrooms.

The Newspaper Guild of Greater Philadelphia notified its union members of the filing in an e-mail yesterday. It told members to stay calm and report for work and that "the company is still in business, the papers are still publishing."

It said the union contracts remain in full force and that workers' wages and benefits will continue to be paid.

A group of investors led by Tierney bought the two Philadelphia papers for US$562 million in June 2006.

According to the Audit Bureau of Circulations, the Inquirer had an average weekday circulation of 300,674 as of September 30, down 11 percent from the prior year. The paper's Sunday circulation averaged 556,426 as of September 30, down 14 percent from the prior year.


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