Attempting to get a hold on its costs as the recession deepens, Lee Enterprises (NYSE: LEE) has struck agreements to refinance $306 million…

Attempting to get a hold on its costs as the recession deepens, Lee Enterprises (NYSE: LEE) has struck agreements to refinance $306 million of debt related to the borrowing it did to buy Pulitzer Inc., the parent of the St. Louis Post-Dispatch, for $1.5 billion almost four years ago. The agreement also allows Davenport, Iowa-based Lee to restructure future payments under its $1.1 billion bank financing arrangements. Lee also has redeemed the 5 percent interest of its minority partner in the Post-Dispatch.

As part of the the refinancing, Lee has repaid $120 million of the principal amount of its $306 million Pulitzer Notes, which are due in April 2009. Lee used a portion of its “restricted cash,” which totaled $129.8 million on Dec. 28, 2008. The remaining debt balance of $186 million has been refinanced by the existing lenders until April 28, 2012. Under the agreement, $9 million of restricted cash was retained to ease the liquidity of the operations of Pulitzer Inc.

Other key provisions of the refinancing include:

– Quarterly principal payments of $4 million beginning in June 2009
— An additional principal payment from restricted cash of up to $4.5 million in October 2010
— Increase in the coupon from 8.05 percent to 9.05 percent until April 28, 2010, and increasing 0.50 percent per year thereafter

In the end, this deal cost Lee about $20 million in financing costs, including professional and advisory fees. The newspaper publisher had been on think ice back in December, as it faced potential default on debt due in mid-January. In the end, it rreceived waivers on the debt payment, which gave it the breathing room to complete this refinancing. Without the waivers, Lee would surely have faced a speeded up repayment schedule on its outstanding debt, likely triggering a default. Release

The end of the JOA: E&P’s Mark Fitzgerald has a breakdown of what this refinancing ultimately means: an end the last financial relationship between the parent of the Post-Dispatch and the Newhouse family, whose St. Louis Globe-Democrat was once its joint operating agreement partner. After the Globe-Democrat closed shop, Pulitzer Inc. and Newhouse continued to share the profits and expenses tied to the Post-Dispatch. As Pulitzer prepped for its sale to Lee, it purchased 95 percent of Newhouse’s interest. The financing effectively liquidates that holding.

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