Heartland Publications LLC, the owner of 23 daily newspapers and other publications in nine states, filed for Chapter 11 bankruptcy protection on Monday after agreeing with its major lender on a plan to cut the company's debt load by more than half.
The privately held company is one of at least a dozen newspaper publishers forced into bankruptcy protection by the recession, which dampened advertising sales in an industry that was already seeing readers and advertisers migrate to the Web.
In its filing in U.S. Bankruptcy Court in Wilmington, Del., Heartland reported assets of roughly $134 million and debts of $166 million.
Heartland spokeswoman Rivian Bell said the company's top lender, GE Capital, has agreed to reduce what it is owed to $70 million from roughly $111 million. In exchange, the financial-services arm of the industrial conglomerate General Electric Co. would get a 90 percent stake in the company.
Bell said that the remaining 10 percent ownership stake would be distributed to the company's unsecured creditors in return for canceling their debt _ but only if they agree to the plan.
The largest unsecured lender is the hedge fund Silver Point Finance LLC, which is owed $44 million in unsecured debt. Silver Point did not immediately respond to a request for comment.
Heartland said that by reaching an agreement before filing, it hoped to emerge from bankruptcy protection by early spring. The company said the newspapers _ in Georgia, Kentucky, North Carolina, Ohio, Oklahoma, South Carolina, Tennessee, Virginia and West Virginia _ would continue operating as usual.
In court filings, Heartland said it has taken steps to bring costs down over the past two years, including cutting its full-time work force and overtime hours as well as reducing the width of its newspapers to cut paper and ink costs.
Nevertheless, falling ad revenue forced the company in February to begin talks with lenders on restructuring its debt.
Heartland projects its revenue will decline 11.6 percent this year from 2008 levels after falling 4.8 percent the year before. Although it did not give a full revenue projection for 2009, the company said revenue for the 12 months ending in October totaled $55.2 million.
Heartland, which has its headquarters in Clinton, Conn., has nearly 800 full-time and part-time employees and publishes 23 paid-circulation daily newspapers, along with several weekly and free publications.
Monday's bankruptcy filing comes one day after Citadel Broadcasting Corp., the nation's third-largest radio broadcasting company, also sought Chapter 11 protection. Like Heartland, Citadel reached an agreement with major lenders ahead of time on a deal that would erase about $1.4 billion of debt in exchange for control of the company.