Media General to face debt crunch within weeks

On Thursday, Media General — publisher of the Richmond Times-Dispatch and the Tampa Tribune — reported a net loss for the fourth quarter of 2011 and for the full year.

That was not the really bad news, however.

Management announced that it “is uncomfortable with its ability to remain in compliance” with the terms of its loans, which are tightening each quarter of 2012.

In a conference call with analysts, CFO James Woodward said the company is working with advisers to get out of trouble. It hopes to have a proposal within two weeks to renegotiate the terms of the loans and/or extend their maturity date (currently March 2013).

CEO and President Marshall Morton added that the company would consider possible asset sales — of a newspaper property or a local TV station — as part of a longer term resolution of the debt issue.

Media General expects a better 2012, thanks mainly to political advertising at its television stations, a number of them in Republican primary battleground states South Carolina and Florida.  Many of its stations are NBC affiliates and will also benefit from Super Bowl and Olympics advertising.

Deep expense cuts at the Tampa Tribune, where 165 positions were eliminated in December, will help too. Losses will be much less in 2012, executives said, though they stopped short of predicting profitability.

According to loan covenants now in place, Media General needs to reduce its debt to EBITDA (earning before interest, taxes, depreciation and amortization) from 7.43 at the end of 2011 to 5.5 by the end of this year.

Several analysts in the call suggested that even if lenders agree, Media General might have trouble keeping up the required earnings ratio in 2013 as the political ad windfall goes away and print losses continue.

Woodward said he is confident the company can get “a clean audit” as a going concern, due later this quarter, though some progress over the next several weeks on the debt overhang may be needed.

When these issues surfaced in a contentious earnings conference call three months ago, Media General’s stock briefly dipped to under $2 a share. It had since bounced back to about $5.50 but fell almost 10 percent on Thursday’s news.

Media General is the second newspaper company to report the quarter’s results. Print revenues were down 6.6 percent compared to the same period a year ago, similar to Lee Enterprises’ report last week of a 6.1 percent decline.  That throws cold water on investor hopes (based on strong November results at several other companies) that the start of a turnaround is in progress.

(Poynter’s Tampa Bay Times competes directly with the Tribune in the Tampa market.)

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