NEWS - Manufacturing

By Lou Phelps, SBJ Staff

Dec 12, 2011 - Morris Publishing Group, LLC announced Friday that the company has entered into a purchase and sale agreement with Lulscal, LLC, a Colorado limited liability company, for the sale of the company’s newspaper building and real estate located at One Press Place, in Athens. The building is situated on approximately 3.1 acres.

Morris Publishing will continue to publish its newspaper, the Athens Banner-Herald, following the sale, according to Stephen K. Stone, Senior Vice President and Chief Financial Officer.  

The company also announced the sale of its building in Conway, Arkansas, where the company publishes a seven-day daily newspaper, the Log Cabin Democrat.

Under the terms of the agreement in Athens, Lulscal will pay Morris Publishing $13,474,500 in cash at closing, no later than March 1, 2012. The purchase price will increase by $3,333 per day until closing if Lulscal does not complete the purchase by March 1; they are required to close no later than 150 days, though Morris states that the buyer has “broad rights to inspect the Real Property and may terminate the Agreement for any reason within 120 days after the date of the Agreement.”

Morris Publishing will have the right to lease back the property only through the end of 2012, and will be renting the first floor, paying $42,306 a month, plus renting additional industrial space and other space in the building for an additional $28,808 a month, on a month to month basis.

Morris’ lenders of its working capital facility, CB&T – a division of Synovus Bank - had to agree to the deal as part of the publishing company’s loan and line of credit agreement signed this past April 2011 that provided Morris with a line of credit for operations.

Despite cuts in personnel and other operating costs, the company continues to report losses or breakeven positions on operations, before paying annual interest on its primary, post-bankruptcy restructuring loans of more than $7.1 million a year in interest payments, alone.

Synovus agreed that Morris Publishing could sell the Athens building, and lease it back; sell the company’s newspaper building in Conway, Arkansas for a projected $665,000; and use the net cash proceeds to prepay any balances under its Working Capital Facility; and attempt to find new financing without terminating the Working Capital Facility as long as the new notes do not exceed $ 3 million.   

If consummated, the sale of the Real Property would constitute an "Asset Sale" as defined in Morris Publishing’s Indenture dated March 1, 2010 with respect to its $100 million aggregate principal amount of Floating Rate Secured Notes due 2014. Under the Indenture, Morris Publishing is required to use the “Net Cash Proceeds” (after deducting certain expenses and taxes, as defined in the Indenture) from an Asset Sale to prepay any amounts outstanding under its Working Capital Facility and then to offer to repurchase New Notes from note holders on a pro rata basis at a purchase price of 101% of the face amount of the New Notes repurchased.

Morris Publishing expects to use the Net Cash Proceeds of the sale of the Real Property to repurchase New Notes in accordance with the Indenture.

The company’s management views this sale as an important step in Morris Publishing's efforts to repay and/or refinance all of the indebtedness represented by its principal borrowing, according to Smith. “Morris Publishing will explore refinancing opportunities, subject to market conditions, with hopes to repay and/or refinance this indebtedness in 2012,” Smith reported to the SEC.