An agreement between McClatchy Co. and its banks puts the country’s third-largest newspaper chain at risk of defaulting on its debt by the end of the year, according to credit analysts. If that happens, Bank of America and other creditors could either show leniency and rework the terms of their agreement or push the publisher of 30 daily newspapers, including the Miami Herald and Sacramento Bee, into bankruptcy.
In the current environment, banks are less likely to sustain companies on life support, said Shelly Lombard, an analyst at Gimme Credit. She pointed to the example of Idearc ( IAR - news - people ), a Yellow Pages publisher, which breached debt agreements and filed for bankruptcy in March. “Banks are starting to pull the plug on companies,” she said. “It used to be that banks worked with the clients because they were better alive than dead. Some of them may not be worth it.”
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Lombard said “A lot of it depends on the economy.” If Internet advertising and print advertising rebounds before McClatchy manages to avoid tripping its covenants, then maybe it’s one newspaper chain that survives the recession. “It’s certainly within the realm of possibility,” she said.
Classic wishful thinking, "print advertising rebounds," that is not going to happen.
“Within the realm of possibility” is a very weak statement. That I might win the lottery is within the realm of possibility. How many lottery tickets should I buy?
Lombard also says the only way for McClatchy to continue is to click your rub red slippers three times.
Print revenue will definitely come back -- but not to anywhere near what it was in the good old days.
The question is, will that smaller print revenue plus online and misc. revenue be enough to run the company with? Remember we are 3/5 the size we were a year ago. That's a lot fewer people to pay, and people is where the highest costs are.
I happen to know they are actively working on consolidating and centralizing business information systems, with ad systems going central sometime in 2010 and circulation at some later time. That will mean more jobs eliminated at the various papers unless you're lucky enough to be selected as the new central location.
Also looking at hurting the postal service big time by stealing share for preprints that used to go into direct mail before they started raising postal rate through the roof.
These folks have some tricks up their sleeves. Desperation is a powerful motivator.
Being a business owner in Fresno I will no longer advertise in The Bee.Having worked in their circulation dept at one time. I know for a fact that almost 30% of their circulation doesn't even pay for the paper or they are late on payments.Also newspapers have forgot who their customer is.
I hope they crash and burn..Especially in Macon Ga.@ the telegraph. They're positioning themself for it real well...I know I USED to work there.
Also looking at hurting the postal service big time by stealing share for preprints that used to go into direct mail before they started raising postal rate through the roof.
I don't know quite how to tell you this, but whole newspapers are now shifting to postal service as it is still cheaper to deliver. Advertisers are aware of this and they have a broader distribution.
Once advertisers learn that the alternatives are better, don't expect a return to print. Print is dead and will not recover.
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