Heartland Publications enters bankruptcy to restructure loan debt

By Caroline Salls

Pittsburgh, Dec. 21 - Heartland Publications, LLC made a pre-packaged Chapter 11 bankruptcy filing Monday in the U.S. Bankruptcy Court for the District of Delaware after reaching an agreement with the majority of its secured first-lien lenders, led by General Electric Capital Corp., on a financial restructuring that will reduce the company's debt by more than half and create a new capital structure, according to a news release.

The company said it will file its pre-packaged plan of reorganization in the next week, and it expects to complete the reorganization by early spring.

Heartland said it has sufficient funds and positive cash flow to pay its ongoing expenses for the foreseeable future.

"We have built Heartland Publications into one of the best-performing newspaper companies in the country. And we have made great strides to reduce costs as we made investments into online and other new products and revenue streams," president and chief executive officer Michael C. Bush said in the release.

"The only problem we have not been able to fix is our balance sheet, which was not predicated on either a severe recession or substantial reduction in newspaper valuations.

"With the support of our senior lenders, we have voluntarily entered Chapter 11 as the most expeditious way to achieve the kind of balance sheet we will need for future growth."

Under the company's pre-negotiated plan, $70 million of existing first-lien debt would be exchanged into two term loans of $60 million and $10 million, respectively, plus an additional $2 million revolving credit facility.

In addition, the first-lien lenders would be entitled to 90% of the equity in the reorganized company.

Holders of second-lien claims would receive no distribution if they reject the plan.

Heartland said the plan also calls for full satisfaction of general unsecured claims.

According to court documents, Heartland had $134.25 million in assets and $166.17 million in debt at Oct. 31.

The company's largest unsecured creditor is Silver Point Finance LLC of Greenwich, Conn., with a $44.22 million loan claim.

The company's financial adviser is Duff & Phelps Securities, LLC.

Heartland is a Clinton, Conn.-based newspaper operator. Its Chapter 11 case number is 09-14459.

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