The owner of 23 daily newspapers and a host of other publications in nine states -- including several community papers published in the Triangle -- has filed for bankruptcy protection.
Heartland Publications filed for reorganization under Chapter 11 of the federal bankruptcy code today after reaching a deal with its largest lender to cut the company's debt load by more than half, the Associated Press reported. Heartland publishes the Fuquay-Varina Independent, Holly Springs Sun, Cleveland Post, The Apex Herald and Garner News.
The company said its newspapers — in Georgia, Kentucky, North Carolina, Ohio, Oklahoma, South Carolina, Tennessee, Virginia and West Virginia — would continue operating as usual. The company said that by reaching an agreement before filing it hoped to emerge from bankruptcy protection by early spring.
The privately held company, based in Clinton, Conn., is one of at least a dozen newspaper publishers forced into bankruptcy protection by the recession, which depressed advertising sales in an industry that was already seeing readers and advertisers migrate to the Web.
In its filing in U.S. Bankruptcy Court in Wilmington, Del., Heartland reported assets of roughly $134 million and debts of $166 million, according to the Associated Press.
Heartland spokeswoman Rivian Bell said the company’s top lender, GE Capital, has agreed to reduce what it is owed to $70 million from roughly $111 million. In exchange, the financial-services arm of the industrial conglomerate General Electric Co. would get a 90 percent stake in the company.
Bell said that the remaining 10 percent ownership stake would be distributed to the company’s unsecured creditors in return for canceling their debt — but only if they agree to the plan.
In court filings, Heartland said it has taken steps to bring costs down over the past two years, including cutting its full-time work force and overtime hours as well as reducing the width of its newspapers to cut paper and ink costs.
Nevertheless, falling ad revenue forced the company in February to begin talks with lenders on restructuring its debt.
Heartland projects its revenue will decline 11.6 percent this year from 2008 levels after falling 4.8 percent the year before. Although it did not give a full revenue projection for 2009, the company said revenue for the 12 months ending in October totaled $55.2 million.
Heartland has nearly 800 full-time and part-time employees.
David Ranii has been a business reporter at The News & Observer since 1993. Over the years he has covered information technology, banking, insurance, the pharmaceutical and biotechnology industries, media businesses and real estate. Contact him at 919-829-4877 or 
Comments
The implication
Mon, 12/21/2009 - 23:02 — gwscottNice story. I like this blog. Shows you can do journalism in a blog. And I hope it shows that journalists and citizen-commentators can hold some worthy, continuing conversations in spaces like this.
The implication of this bankruptcy, for those who miss it, is that GE Capital has just become a newspaper publisher -- not that its executives really want the role. They would have been much happier collecting interest on $111 million in loans.
They aren't likely interested in remaining owners of this chain, but the problem is, how do they sell off the parts at a time when almost no one knows the value of a newspaper?
My prediction is that GE Capital will hold the various parts long enough to see a slight rebound in the economy -- long enough to see the papers and the organization gain, say, 20 percent of the overall value. If they ever do, that is. THEN, once investors can get loans and the papers may have SOME value, GE Cap will sell off the parts to the most reliable bidders. That seems to be the way the game is being played. A paper in Apex may look like a decent investment, especially to local investors who have diversified interests. Some of the shoppers, on the other hand, may be just about dead. Just depends on markets and community access to the web.
Freedom Newspapers has been in chapter 11, too, and has a handful of newspapers in North Carolina. That org is now essentially the property of a consortium of banks. We'll probably see a sell-off there, too, if and when the economy rebounds and publishers can make a case that newspaper advertising is again robust enough to allow for short-term profits, say over the next 10 years.
Prior commentator finesses a good point by praising N&O. It's real value is in its ability to do worthwhile journalism that is important to its readers and communities. As long as N&O plays this key role, it might weather the storm. McClatchy, too. The rest of us should hope so, because the state is going to be in big trouble without a serious organization gathering and delivering news. As much as we depend on broadcasters for info, we need what newspapers have in their newsrooms -- a critical mass of people who know how to dig and explain. We're not going to get that anywhere else any time soon.
Gotta feel sorry for these
Mon, 12/21/2009 - 21:04 — countriboyGotta feel sorry for these 800 employees, finding out their employer is going bankrupt right here at Christmas time. Newspapers are having a tougher and tougher time of it these days, what with all the competition from the Internet and the public's shrinking attention span. Heartland took on a little too much debt at a bad time. The N & O's parent company has taken on a lot of debt, too, but the hardworking staff members of the N & O are still putting out the best paper in the state. You can tell you're doing a good job by the number of people you are making mad. My mama always said a newspaper wasn't doing its job when it wasn't making someone mad.