The company will file soon its Plan of Reorganization, which shows how Heartland will reduce its debt by more than half and create a new capital structure for future growth.
“We have built Heartland Publications into one of the best-performing newspaper companies in the country. And we have made great strides to reduce costs as we made investments into online and other new products and revenue streams,” stated Michael C. Bush, president and chief executive officer. “The only problem we have not been able to fix is our balance sheet, which was not predicated on either a severe recession or substantial reduction in newspaper valuations. With the support of our senior lenders, we have voluntarily entered Chapter 11 as the best way to achieve the kind of balance sheet we will need for future growth.”
Bush stated that the company is asking the court “to approve immediately the continuation of all employee and customer programs and certain key vendor initiatives. Most important, we will continue to participate in and serve our communities as we have in the past. Our readers, advertisers, and other business associates will see no change in our day-to-day operations.”
Chapter 11 is the portion of law that applies to corporate reorganizations.
Many well-known companies, including Macy’s, Continental Airlines, Toys ‘R Us, Southland (7Eleven Stores), Winn Dixie Stores, and most recently General Motors and Charter Communications reorganized their debt successfully via Chapter 11. Other newspaper companies that are reorganizing under Chapter 11 include the Chicago Tribune, Los Angeles Times, Philadelphia Inquirer, and Minneapolis Star-Tribune.
“Nothing changes at our newspaper,” said Lonnie Adamson, general manager of the Jefferson Post. “Our newsroom is working, we’re running our presses on schedule, and we’re moving newspapers out to readers as usual. Advertising contracts remain in effect, so no one will miss the weekly specials. The only thing that will change is that our parent company will have a better financial foundation, and that’s good news as far as we’re concerned.”
Under the company’s Plan of Reorganization that will be filed soon, $70 million of existing debt will be exchanged into two term loans of $60 million and $10 million, plus an additional $2 million credit revolver. In addition, the first-lien lenders, led by GE Capital, will be entitled to about 90% of the equity in the reorganized company. Holders of second-lien claims will receive no distribution if they reject the Plan. The Plan also calls for all general, unsecured claims, such as suppliers, to be paid in full at the end of the process in early spring.
Bush acknowledged the thousands of advertisers and subscribers who work with Heartland’s newspapers. “Our readers and advertisers are our lifeblood,” he said. “We appreciate their support every day. We won’t disappoint them.”
Heartland employs more than 530 full-time and more than 230 part-time employees. Approximately 10 people work at the Jefferson Post. Bush credited the company’s employees “who have worked so hard to provide newspapers that meet the needs of their reading audiences. We can take pride in consistently offering the best in news, advertising and entertainment for our local communities.”
More information about the company’s restructuring can be found at http://chapter11.epiqsystems.com/heartlandpublications or by calling (866) 222-1116.