Revenue collapse leads Lee Enterprises to cut dividend, pay higher interest rate

Just like McClatchy did last month, Lee Enterprises announced it is renegotiating with its lenders.

Lee Enterprises Inc., struggling like all other newspaper publishers from plunging revenue in a weakening economy, said Thursday it was suspending dividend payments and paying higher interest rates to gain more flexibility with lenders.

A new credit agreement with lenders changes the formula-based financial targets that Lee must meet to avoid technical default, which ultimately could force the company to sell assets or declare bankruptcy. It raises one threshold and lowers another to account for reduced cash flow.

The new agreement also reduces Lee's revolving credit line to $375 million, from $450 million. The company said it had drawn only $207 million as of Sept. 30.

As part of the agreement, Lee cannot pay dividends until it can lower debt to no more than 4.5 times its cash flow, not expected before September 2010. The new terms let Lee take on debt of as much as 6.75 times its cash flow.

Lee and McClatchy have not seen the bottom.
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