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Bankruptcy looms for Times parent company

March 20, 2012

The parent company of The Walpole Times, GateHouse Media, continues to go through some trying times as it hurtles closer and closer to bankruptcy. Independent observers took notice this past month when the company filed its 2012 Annual Report with the U.S. Securities and Exchange Commission and specifically mentioned that bankruptcy could be on the horizon.

The company has over $1.2 billion in debt that it will have to pay off by 2014, but its net assets don’t even come close to amounting to that. With the company continuing to bleed red ink and facing declining revenue and deficits as far as the eye can see, it’s likely only a matter of time before Walpole’s hometown newspaper is crushed by its parent company and is either shut down or more likely sold off at a bargain-basement fire sale price.

I report this will all due respect to the dedicated Times staff – I am not celebrating this looming bankruptcy, and as I’ve already noted I am disappointed that GateHouse has destroyed the Times and laid off legendary Sports Editor Keith Lewis. I value local journalism. The Times can not be replaced, and I have been a religious Times reader for almost my entire life. The sad thing is that this bankruptcy is not the fault of anyone at the Times itself – they can only sit and watch as this unfolds. The other thing, of course, is that I have been fortunate enough to have a column in the Times so I’m certainly not cheering about the likelihood that I won’t be able to do that anymore.

“We may not generate a sufficient amount of cash or generate sufficient funds from operations to fund our operations or repay our indebtedness at maturity or otherwise,” the company’s annual report reads.

“There can be no assurance that our business will generate cash flow from operations or that future borrowings will be available to us in amounts sufficient to enable us to pay our indebtedness or to fund our other liquidity needs. Currently we do not have the ability to draw upon our revolving credit facility which limits our immediate and short-term access to funds. If we are unable to repay our indebtedness at maturity we may be forced to liquidate or reorganize our operations and business under the federal bankruptcy laws,” the report admits.

Observers also seized on the latest example of the company being out-of-touch with reality, as top company executives walked away with pay bonuses this year. The company gave out a whopping $1.4 million in bonuses to top executives even while these executives oversee a company that is sinking fast. Most other company employees have had their own pay frozen for years, while they do more with less.

My prediction is that once the company goes under, an independent investor or small group of investors will step in to purchase the Times and other Massachusetts newspapers that are part of the GateHouse chain. Most of the papers owned by the company in this area seem to be at least somewhat profitable, and I believe one investor or a small group of investors might find that attractive. Perhaps someone will even buy the Times alone, by itself.

It is easier to run a newspaper company when there are fewer papers to deal with. The reason GateHouse got into this mess is because they bought too much too quickly, and went on a spending spree to rack up $1.2 billion in debt. Running a smaller network of papers in the Boston area would be a much more profitable endeavor. Don’t count the Times out just yet, but 2014 will be here before we know it, and it will be interesting to see what happens to our beloved local newspaper…

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