Journal Register Could Be First Major Chain Bankruptcy

(MoneyWatch)  Despite all the red ink and job cuts at the nation's newspapers this decade, no major chain has gone bankrupt -- yet. That may be about to change, however. The Journal Register Co. announced recently that it has retained the investment bank Lazard Freres &. Co. to advise its board on a possible restructuring.

The Journal Register owns and operates 22 daily newspapers, including The New Haven Register, 310 non-daily periodicals, and 229 related web sites. Its news properties are concentrated on the east coast and upper Midwest.

A publicly traded company, Journal Register reported about $625 million in debt at the end of last year, with earnings of only about $90 million, and it now faces the imminent likelihood it will be delisted by the New York Stock Exchange. The Exchange gave the company ten days as of March 31 to come up with a plan to bolster its stock price, which had fallen to 52 cents by the end of trading last week.

The company's dire straits reflect the overall crisis facing the U.S. newspaper business. Print ad revenue fell by 9.4 percent industry-wide last year, the deepest loss in the nearly 60 years the Newspaper Association of America has been keeping records.

In fact, during the half-century from 1950-2000, the newspaper industry recorded losses in ad revenue only five times. By contrast in 10 years, the industry enjoyed double-digit growth from its combined national, local, and classified ad bases. But the last double-digit growth year was 1984; and, starting in 2001, newspapers have entered a period of decline that now has their overall print ad revenue down a cumulative 13.3 percent from its peak in 2000.

The only bright spot in the numbers for newspapers is their online ad revenue, which increased 18.8 percent last year. But, as online advertising only accounts for a shade under 7 percent of newspapers' total ad revenue, it represents little more than a finger in the dyke at present.

Therefore, while the Journal Register may be the first public newspaper company to go bankrupt, it's unlikely to be the last.