Unlike other companies that would scratch and claw to delay the inevitable by a few more months, troubled newspaper publisher Journal Register (NYSE: JRC) is going peacefully: the company has confirmed that it won't appeal a NYSE delisting notice, and that effective tomorrow, it will no longer trade on the NYSE. The company was warned by the exchange earlier this month that its sub-$1.00 share price made it non-compliant, and that it had 10 days to come up with some sort of plan to turn things around. That news, coupled with an announcement a couple days later that it had hired an investment bank to explore strategic options, just sent the stock in the wrong direction. On the eve of its delisting, shares are trading at around $0.33.
So why is JRC teetering on worthlessness, despite the fact that it's still a profitable enterprise? A burdensome debt load, brought on by an untimely acquisition, as Alan Mutter explains: "The company's debt, which amounts to an untenable seven times its operating earnings for the last 12 months, is now rated at Caa1 by Moody's Investor Services, which means the rating agency believes the company has better than a 1 in 3 chance of default. Moody's is concerned that the company cannot generate enough cash to cover the debt repayments scheduled for 2009. The largest portion of the debt that threatens to force JRC into bankruptcy resulted from the acquisition for $415 million in 2004 of a group of community papers concentrated around economically distressed Detroit. To date, the company has been forced to write off $215 million, or nearly 52%, of the value of those assets."
-- Sun-Times Media Group is in a similar boat: The Sun-Times faces delisting and has hired an investment bank to explore strategic options. How's that process going? Chicago Tribune media columnist Phil Rosenthal (via Romenesko) claims to have got his hand on an internal memo prepared by Lazard touting the company as a rare, prestigious asset, perfect for a would-be Sam Zell. The memo also argues that the company is back on the path towards profitability, though Rosenthal suggests that it's ignoring certain tax issues that could torpedo its rejuvenation. Bear in mind that Rosenthal is taking some shots at the crosstown paper. Always rivals, tension between the two recently became a bit more heated, you may have heard, after a Chicago Tribune intern won a Sun-Times video contest designed to make fun of Zell. The video and the story from Tribune's perspective are here.
By Joseph Weisenthal