The crushing debt that was built up over the past few years at newspaper publishers like The Tribune Company and McClatchy (NYSE: MNI), is now weighing heavier on Lee Enterprises (NYSE: LEE), the parent of the St. Louis Post-Dispatch. This week, the Davenport, Iowa, publisher said that it faced several potential default triggers on its debt, the WSJ reported. In a statement, Lee said it notified the SEC that it will delay filing its annual report until on or before Dec. 29, because it needs additional time to sort out the amount of non-cash charges it will take to reduce the carrying value of goodwill and “other intangible assets.” Lee expects the impairment charges to total at least $180 million after-tax for the quarter that ended Sept. 28, 2008. Lee’s auditor, KPMG, said it will include an explanation in the company’s annual report of Lee’s “ability to continue as a going concern.”
Like a lot of newspapers facing the severe effects of the credit crunch, Lee is heavily saddled with debt that is tied mostly to acquisitions. Lee borrowed roughly $1.5 billion to acquire Pulitzer Inc. three years ago. And so, to keep itself from defaulting on its debt, Lee is trying to get its creditors to waive potential violations of its lending terms. It also wants to extend or refinance $306 million of senior Pulitizer notes that are due next year. Without the waivers, Lee would face default, as the repayment schedule could be accelerated. The portion of Lee’s debt considered current was $456 million as of June 29. Lee had about $149.5 million in cash and equivalents as of Sept. 28 and has $168 million in borrowing room on its credit facility.
In Lee’s statement, Lee chairman and CEO Mary Junck tried to sound an optimistic note: “Although the credit markets remain very difficult, lenders have shown a willingness to work toward acceptable solutions to help us avoid violating performance conditions in our debt agreements. Even in this recession, Lee continues to generate substantial cash flow, and we continue to believe that Lee will emerge strong when all the national economic turbulence ends.”