NEWS - Manufacturing

SBJ Staff Report

Nov. 18, 2009 -- Morris Publishing Group LLC, publishers of the Savannah Morning News, was granted more time to convince some of its lending banks to accept a pre-packaged restructuring plan that the company proposed back in September to stay out of bankruptcy court.

The company filed an SEC 8K today announcing that they have until Jan. 8, 2010, to get 99 percent of its lenders to agree to the plans the company has proposed to deal with more than $435 million in debt and overdue interest.  It was welcome news for those who hope that the Morris family of Augusta can retain control of the Georgia-headquartered publishing company.

To date, 75 percent of the bankers that make up a consortium of bond lenders who have called $238 million in bonds have agreed to the Morris family’s plan, but another 25 percent of the lenders have consistently refused to go along.  According to the company’s 8K today, they will now have up until Jan. 8, 2010 to gain their agreement, or must file for bankruptcy protection by Jan. 11. It looks like that will be the last extension.

It’s a complicated financial restructuring strategy the family has devised, with two essential elements.  One part addresses the company’s senior debt of $138 million. The Morris family would be given 150 days to find someone to loan them $110 million.  Meanwhile, they would put $110 million into escrow, as assurance for those lenders, and pay back $28 million immediately.  They have reached agreement on this portion with lenders.

But the second part of the financial restructuring is where they have run into a wall.  Since last February, it’s been clear that 25 percent of the banks that joined together back in 2005 to lend the company hundreds of millions want their money back. Morris Publishing has failed to pay over $20 million in interest payments.  That group of bankers has never agreed to the over 15 extensions granted Morris Publishing Co. since February 2009.

The majority of the lenders have agreed to write off the $238 million in bonds, and take $100 million in new senior notes.  This plan would leave the Morris family in charge of the company, theoretically, with more than 50 percent of the company under control of the lenders.  Total assets of the company are now listed as approximately $171 million.  But Morris must have 99 percent agreement or they will be forced into bankruptcy.

In that event, the federal bankruptcy court will appoint someone to oversee the company, and any restructuring plans proposed by the two sides – the Morris family and the banks – will be negotiated.  Lenders often want the company put up for sale or broken apart, believing that the parts are worth more than the whole.  In the newspaper industry, the latter is often true. 

Philadelpia Newspapers, now in bankruptcy, are being forced into a sale by the lending banks.

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