Morris Publishing likely to require additional credit facility amendments in 2009

By Jennifer Lanning Drey

Portland, Ore., Nov. 12 - Morris Publishing Group LLC believes it will require additional amendments to its senior bank credit facility by mid-2009 because the company does not expect to be in compliance with the current credit facility requirements after reporting results for the second quarter of that year, Craig Mitchell, Morris' senior vice president of finance and treasurer, said Wednesday.

The company amended the credit facility agreements in October, which added a requirement that parent company Morris Communications Co. and its subsidiaries sign a letter of intent to complete a transaction that would generate sufficient funds to be able to prepay all credit facility borrowings, or to purchase an assignment of all loans and commitments of the lenders at par, by the delivery date of Morris Communications' financial statements for the quarter ending March 31, but not later than May 30, 2009.

During the company's third-quarter earnings call, Mitchell said it is unlikely Morris Publishing will be able to consummate a transaction or refinancing and, therefore, believes it will be dependent on its parent to enter into a transaction that would allow the company to amend or refinance the bank credit facilities.

"We will endeavor to amend or refinance the senior credit facility in the first half of 2009 but can provide no assurance we will be able to do so," Mitchell said.

The backstop plan is to renegotiate the existing senior credit agreement if the company is unable to do anything else, he said.

When asked what would compel Morris' senior lenders to enter into another amendment, Morris said it would be a matter of "staying in the ballgame" and allowing the company more time to wait out the current economic downturn and credit market conditions.

Mitchell said Morris is working through the process of getting a letter of intent for a sale on a number of assets, with a focus on achieving a transaction at the Morris Communications level.

Debt/liquidity profile

Morris ended the third quarter with $424 million in outstanding debt, which included $60 million outstanding under the amended revolving credit line, $85.5 million on the term loan and $278.5 million of outstanding senior subordinated notes.

Borrowing capacity at Sept. 30 was $40 million, and the company had $8.7 million of cash.

The company was in compliance with the covenants on the amended credit facility at the end of the third quarter.

Morris reported a third-quarter loss from operations of $163.2 million, compared to income from continuing operations of $3.9 million for the same period last year. The third-quarter results reflect an impairment charge of $170.7 million to completely write off goodwill in light of market conditions.

Advertising revenues were down 19% for the third quarter.

Morris is an Augusta, Ga.-based media company.

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