Editor & Publisher

November, 2008 Issue

By Mark Fitzgerald and Jennifer Saba

GIVEN THAT DEBT IS THE CENTRAL problem for newspaper companies with the most well-publicized woes, the credit freeze that stunned markets this fall could be particularly painful if it lingers too long. “Most newspaper companies are in for a very bumpy ride because their balance sheets were in such poor condition prior to the development of this financial crisis,” warns media economist Robert Picard.

Already, lenders are putting heat on some of the biggest debters in the industry – and the pressure is only going to grow, financial experts predict…Broker Kevin Kamen of Kamen & Co. Group Services, thinks he knows what’s ahead – nothing but trouble. While he’s still shopping some newspaper and magazine properties, activity has slowed dramatically. “You’re going to see closings,” he says. “Looking at the P&L ( profit and loss ) statements that I see every day – everybody is struggling. When money dries up, it doesn’t matter how great your newspaper is if you can’t pay the bills.” In passing – and without mentioning names – Kamen mentions someone who symbolizes the industry’s distress: a newspaper publisher whose house is in foreclosure.

“It’s fair to say in a capital-constrained lending environment like this, typically the weakest players are the ones who get hurt, and newspapers are in the weaker categories,” adds bond analyst Mike Simonton of Fitch ratings. “The situation is pretty poor for newspapers now, but there’s no reason to believe it couldn’t get worse.”