GRIM: Inky/DN Owners Miss Second Debt Payment


STANDARD & POOR’S:  New York, Oct. 2 (LCD) – Philadelphia Media Holdings earlier this week missed a Sept. 30 deadline to make interest and principal payments due on its senior loans, sources said. The company had been operating under a loan forbearance agreement that ran through Sept. 10. That forbearance was not extended.The newspaper concern has not been able to access its revolving credit due to a covenant breach. The RC was reduced to $35 million as part of the waiver agreement. Philadelphia Media in early June did not make an interest payment on a mezzanine loan after senior lenders blocked the payment because it was in violation of a senior-leverage covenant at the end of 2007. Royal Bank of Scotland in July 2006 wrapped the $295 million term loan, along with a $50 million revolving credit that backed the $562 million purchase of the Philadelphia Inquirer and the Philadelphia Daily News, two newspapers owned by McClatchy. The financing included $85 million in mezzanine debt underwritten by RBS. The transaction was part of McClatchy’s plan to divest newspapers it needed to sell as part of its $6.5 billion purchase agreement with Knight Ridder. Philadelphia Media is an investor group pulled together by Brian Tierney, an advertising and public-relations businessman, and Bruce Toll of the Toll Brothers homebuilding family.

Philadelphia Media Holdings LLC (PMH) released the following statement in response to requests for comment:

“Over the past six months, Philadelphia Media Holdings LLC has been engaged in constructive discussions and negotiations with its senior and junior lenders. In mid-August, PMH submitted a plan that included $20 million in additional equity from the investor group. This infusion of capital combined with the new business plan would enable the company to complete the previously announced sale of the 400 North Broad Street property, which would result in additional paydown. Overall outstanding senior debt would be reduced by 15 to 20 percent. Unlike some companies in our industry, PMH has strong, positive cash flows, which have remained steady year over year. This is the result of significant improvements in our overall cost structure. Equally important, we have received tremendous support for our efforts from our employees and unions.

Given the chaos, volatility and uncertainty in today’s financial and credit markets, the company elected not to make certain payments earlier in the week due under its senior credit agreements. It has informed all relevant parties of this fact and is continuing to meet with them in an effort to finalize the revitalization plan. We remain hopeful that we can quickly finish the terms of the new plan with our lenders, pay the interest we deferred earlier this week with cash we have on hand, and resume our focus on long-term community service and quality journalism that our newspapers and digital properties offer to the local community.”

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