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GateHouse Media Files Prepack Bankruptcy to Complete Secured Debt Restructuring

September 27, 2013, 08:01 AM
Filed Under: Bankruptcy

GateHouse Media, Inc. announced it has commenced voluntary chapter 11 bankruptcy proceedings in the United States Bankruptcy Court for the District of Delaware. Concurrently with the bankruptcy filing, GateHouse filed and requested confirmation of a joint prepackaged plan of reorganization.

GateHouse announced on September 11, 2013, that it had entered into a plan support agreement with the administrative agent and certain lenders under its 2007 secured credit facility, including certain affiliates of GateHouse, which contemplated a comprehensive restructuring of approximately $1.2 billion of debt scheduled to come due in August 2014.

According to Michael Reed, director and chief executive officer, the bankruptcy filing was a strategic decision to facilitate this restructuring, and not a reflection of any operational difficulties on the part of GateHouse.

"We have complied with and are current with all our obligations," he said, "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. Upon emergence, we will be under common ownership with Local Media Group, a company with a strong community media presence and performance that operates eight daily community newspapers and thirteen weeklies. 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."

Pursuant to its plan support agreement, GateHouse solicited votes on the plan over the past week from holders of claims under its 2007 secured credit facility and certain related interest rate swaps. The plan was accepted by the only impaired class of creditors entitled to vote on it. Specifically, 79 out of the 80 holders of secured debt entitled to vote holding an aggregate amount of $1,199,317,153 (representing 99.99% of the total secured debt) voted to accept the plan. No creditors voted to reject the plan.

Pension, trade and all other unsecured creditors of GateHouse would not be impaired under the prepackaged plan, and their votes were not solicited. GateHouse's common stock would be canceled under the plan, and holders of secured debt would have the option of receiving a cash distribution equal to 40% of their claims, or stock in New Media Investment Group Inc., a new holding company that will own GateHouse and Local Media Group.

GateHouse, which operates in 330 markets across 21 states, intends to continue to operate its business without interruption as a "debtor-in-possession" under the jurisdiction of the bankruptcy court. According to Reed, GateHouse has sufficient cash to operate during the chapter 11 process and does not need, nor does it intend to obtain, debtor-in-possession financing.

"We don't believe our customers, vendors, or employees will notice any change on our day-to-day operations as a result of the bankruptcy," he said. "From an operational standpoint, it's business as usual."

Houlihan Lokey Capital is acting as financial advisor to GateHouse, and Young Conaway Stargatt & Taylor, LLP is acting as its legal counsel.

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