NEW YORK - Newspaper companies have been skipping loan payments, missing financial targets in debt agreements and accepting higher interest rates in exchange for more flexibility - and they're not even directly feeling the impact of the credit crisis yet.
But don't expect massive sales or closures of newspapers any time soon, even though at least five newspaper companies overburdened with debt have been forced to confront their lenders over the past few weeks.
With revenue at newspapers shrinking and few investors willing or able to buy them, lenders are loathe to force companies to liquidate assets that are plunging in value. They have few alternatives but to help newspapers stay on track with their payments and hang on until ad prospects improve - if they ever do.
"This is not a great time to, let's say, repossess the Minneapolis Star Tribune ... and then try to turn around and sell it," said Rick Edmonds, media business analyst with the journalism think tank Poynter Institute.
The Star Tribune said Sept. 30 it skipped a $9 million quarterly debt payment to conserve cash. The next day, the investor group that owns The Philadelphia Inquirer and the Philadelphia Daily News skipped an unspecified interest payment in an apparent bid to force lenders to renegotiate.
The McClatchy Co., one of the largest U.S. newspaper chains and owner of The Sacramento Bee and The Miami Herald among other prominent papers, agreed last month to pay higher interest rates and put up more collateral.
Analysts believe McClatchy came close to a technical default under its old loan terms, which required maintaining certain a cash flow as a percentage of its debt level. The new agreement with lenders changes the formula to account for sustained reductions in revenue.
A smaller chain, Morris Publishing Group LLC, owner of the Juneau Empire, said Wednesday it also agreed to pay high interest rates and meet other conditions in exchange for lenders relaxing financial targets for nearly a year.
Meanwhile, Freedom Communications Inc., which owns The Orange County Register in Southern California, said last Monday that it likely fell short of required financial thresholds as well and was in active talks with lenders.
The troubles all result from reduced cash flow caused by advertising revenue plummeting faster than anticipated this year at newspapers across the nation. Readers and ad dollars already were migrating to the Internet; the weakening economy further reduced ad sales.
In the stock market, too, newspapers' prospects are grim.