GateHouse Media filed for Chapter 11 court protection Friday after creditors approved a restructuring plan giving control of the newspaper and digital company to Newcastle Investment Corp.
Fairport, N.Y.-based GateHouse filed a so-called prepackaged Chapter 11 plan along with its bankruptcy petition in U.S. Bankruptcy Court in Wilmington, Del., a favored location for corporate restructuring.
Newcastle Investment Corp. acquired the Dow Jones Local Media Group, including the Mail Tribune, Ashland Daily Tidings and Southern Oregon Nickel, from News Corp. early this month for $87 million.
None of the recently acquired publications, now known simply as the Local Media Group, are part of the bankruptcy.
Newcastle is an affiliate of Fortress Investment Group, both based in New York.
Newcastle Chairman Wes Edens told investors on Sept. 4 of the pending court protection filing during a conference. GateHouse, which publishes more than 300 daily and weekly newspapers and 91 shoppers in 21 states, listed assets of $433.7 million.
The company reported the vast majority of its lenders, the only class of creditors entitled to vote on the plan, agreed to the terms.
GateHouse built up debt as it acquired overvalued properties before the economic downturn leading to the recession.
GateHouse Chief Executive Officer Michael Reed termed the move a strategic decision, one not reflecting operational difficulties.
"We have complied with and are current with all our obligations," he said in a statement. "But with the challenges facing our industry and the impending maturity of our secured debt next year, we needed to be proactive in exploring options to restructure our debt, recapitalize and position ourselves for future growth. The prepackaged plan proposes a 'balance-sheet restructuring,' by which GateHouse will emerge from bankruptcy with much less debt on its balance sheet, but with its business operations completely intact."
Under the restructuring plan, lenders owed $1.2 billion will receive the company's new common stock. Newcastle possesses 52 percent of the company's debt, entitling it to 52 percent of a new company called New Media Investment Group. GateHouse, which now manages Local Media Group entities, will be under the same umbrella in New Media Investment Group.
"Joining with Local Media Group will be an important step in growing our business and will contribute to our future success as the pre-eminent source for locally focused content, covering and serving our subscribers, advertisers and customers through print, online and other digital products, including mobile applications," Reed said.
Newcastle said Friday it plans to spin off New Media in early 2014. New Media will be a publicly traded company "primarily focused on investing in a high quality, diversified portfolio of local media assets and on growing its online advertising and digital marketing businesses," Newcastle said.
Reach Mail Tribune reporter Greg Stiles at 541-776-4463 or firstname.lastname@example.org. Follow him on Twitter @GregMTBusiness.