DENVER — Affiliated Media Inc., the holding company for MediaNews Group Inc. newspapers including The Denver Post and San Jose Mercury News, said Friday that it plans to file for Chapter 11 bankruptcy protection.
The company said it would file a "prepackaged" plan already approved by lenders, which should allow it to emerge from bankruptcy more quickly. A date for the filing hasn't been announced, but the company said it would be in the near future. The reorganization plan was expected to be filed in federal bankruptcy court in Delaware.
It would be at least the 13th bankruptcy filing by a U.S. newspaper publisher in the past 13 months.
The Hearst Corp. and the Scudder family are giving up interests in MediaNews, according to a person who had knowledge of the plan but spoke on condition of anonymity because he did not want discuss the plan publicly.
A spokesman for Hearst declined to comment Friday.
The owners of dozens of newspapers have been pushed into bankruptcy protection as the recession and competition from the Internet have sapped advertising revenue. Banks and other financial firms have taken over or are angling to take charge at dozens of newspapers, including four of the nation's 15 largest – the Los Angeles Times, Chicago Tribune, the Star Tribune in Minneapolis and The Philadelphia Inquirer.
Earlier this week, Morris Publishing Group, owner of 13 daily newspapers including the Florida Times-Union of Jacksonville, also said it would file a prepackaged plan in federal bankruptcy court.
Affiliated Media's planned bankruptcy filing illustrates the uncertainty facing major newspapers publishers as their main source of income – print advertising – has plunged during the past four years. Since 2005, the industry's annual ad sales have dropped by more than $20 billion, a decline of about 40 percent, based on figures from the Newspaper Association of America.
Publishers are hoping the slump will ease this year as the economy recovers from the worst recession in 70 years. But newspapers still must figure out how to support their operations as more readers and advertisers migrate to the Internet, where ads sell for dramatically less, many news articles are free, and the competition is much greater.
"They don't know how much advertising is going to come back to them" as the economy bounces back, said newspaper analyst Ken Doctor of Outsell Inc.
Mass layoffs and other cost-cutting efforts have helped keep most publishers, but those loaded down with debt like Affiliated Media can't afford to shoulder the financial burdens that they took on during better times.
"This is the new reality," Doctor said. "Newspapers are starting to feel more stable than they did last year. But is this a plateau or just another ledge that they are standing on now?"
MediaNews' management and newspaper operations, employees and vendors won't be affected by the holding company's restructuring, MediaNews Group Chairman and CEO William Dean Singleton said. He is the chairman of The Associated Press board of directors.
Under the plan, company debt would fall from about $930 million to $165 million. Senior lenders would swap debt for stock, the company said. The group of 116 lenders led by Bank of America would hold a majority of stock but not voting power.
Management led by Singleton would retain 20 percent of the company through stock and warrants. Singleton and company President Joseph J. Lodovic IV will own all class A shares, allowing them to choose a majority of the seven-member board of directors. Other stockholders will own class B and C shares.
Singleton said the company has enough cash to fund its operations.
Newspapers' advertising and subscription revenues have been hurt with the rise of online sites that let people read news and advertise for free online. Singleton said Affiliated Media's restructuring would give the company "breathing space" to create a new business model for media.
"We who actually work in the newspaper business have a direct interest in keeping newspapers healthy. But we also can see that the communities we serve rely on newspapers, not only to keep everyone informed, and to check government and corporate abuse, but also to provide a cohesiveness that our society very much needs. ... Yet many of our citizens now take it for granted, and forget how precious it really is," Singleton said in a letter to employees.
MediaNews Group's 54 daily newspapers and more than 100 non-daily newspapers include the St. Paul Pioneer Press and The Salt Lake Tribune. It also has Web sites, television and radio broadcasters.
AP Business Writer Michael Liedtke contributed to this report.