DAVENPORT, Iowa (AP) — Lee Enterprises Inc., publisher of the St. Louis Post-Dispatch and other newspapers, said Thursday that it had reached a deal with most of its lenders to give the company more time to pay back its debt.
Uncertainty about whether Lee would be able to repay about $1 billion in debt due in April had raised fears that the company might have to seek bankruptcy protection. More than a dozen other U.S. newspaper publishers have turned to that refuge to reorganize their finances since 2008.
Lee said it had an agreement to refinance $864.5 million of its debt, under which it would pay steep interest rates to extend the repayment dates to 2015 and 2017.
Although Lee still needs to refinance another $175 million, CEO Mary Junck said in a letter to shareholders and employees that the agreement “will remove a cloud” hanging over the company.
Lee’s stock increased 10 cents, or 16.7 percent, to 70 cents a share in extended trading Thursday after the announcement was made.
The deal pushes the due date on a $689.5 million first-lien loan to December 2015 and a $175 million second-lien loan to April 2017.
Buying more time to repay the money wasn’t cheap.
As of June, Lee had been paying an interest rate averaging 5.07 percent on about $1 billion in debt, primarily from a 2005 acquisition that included the Post-Dispatch, the largest of the company’s newspapers.
For the first-tier loan, the interest rate would increase to 6.25 percentage points above a benchmark known as London Interbank Offered Rate. LIBOR is the average rate at which large international banks are willing to lend to each other on a short-term basis. The benchmark rate, set daily in London, is used as a basis for many corporate loans and mortgages. The loan has a floor on LIBOR of 1.25 percent, meaning Lee would pay a rate of at least 7.5 percent.
The second-lien loan would have an interest rate of 15 percent. Those lenders would also get about 6.7 million new shares of Lee’s common stock. Lee had 45 million shares outstanding as of June 26, so the new stock would represent an increase of 15 percent.
Refinancing of the final $175 million, which is in Pulitzer Notes that mature in April, is a condition of the deal.
The company, based in Davenport, Iowa, had set out to refinance the debt in April, only to back off a month later after meeting with about 150 investors and lenders across the country. Junck told shareholders in a May letter that she was unwilling to agree to refinancing terms that she considered unreasonable. Junck is on the board of directors of The Associated Press.
More than 90 percent of the company’s creditors have agreed to the deal announced Thursday, Lee said.
Chief Financial Officer Carl Schmidt said that if the company can refinance its Pulitzer Notes, it hopes to get the backing of 95 percent of its creditors and be able to implement the transaction out of court. Otherwise, Lee would make a prepackaged Chapter 11 bankruptcy filing, during which the company would expect to operate normally.
Copyright The Associated Press