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Newspaper Publishers Choose Bankruptcy Protection

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It's been a very rough year for media companies, particularly newspaper publishers. An ongoing decline in advertising revenue, huge debt and a continuing inability to obtain additional credit have threatened the industry at large. It should come as no surprise, then, that a number of newspaper publishers have sought protection from creditors through Chapter 11 bankruptcy filings and have been sorting out their financial affairs under the oversight of U.S. bankruptcy courts.

Tribune Co., home to the Chicago Tribune, has been in Chapter 11 bankruptcy since December 2008. A variety of creditors are fighting for control of Tribune Co., chief among them senior creditors led by JPMorgan Chase, which is challenging a bankruptcy court decision to extend the deadline for Tribune Co. to file a new plan of reorganization until February 2010. In turn, JPMorgan Chase and the other senior creditors' efforts to gain control of Tribune Co. are being challenged by junior creditors.

Philadelphia Newspapers, which owns the The Philadelphia Inquirer and Philadelphia Daily News, also filed for Chapter 11 bankruptcy protection in February 2009. Senior creditors are also fighting through bankruptcy court proceedings to gain control of Philadelphia Newspapers. A three-judge panel of the United States Court of Appeals for the Third Circuit recently heard oral argument on the issue of whether Philadelphia Newspapers's senior creditors would be allowed to use the amounts they are owed as bids in an auction proceeding, a measure known as "credit bidding." Philadelphia Newspapers had earlier succeeded in persuading the United States District Court for the Eastern District of Pennsylvania to bar credit bidding in a potential auction proceeding.

Freedom Communications, publisher of the Orange County Register, hoped to exit bankruptcy protection quickly by filing a "pre-packaged" reorganization plan, in which a debtor's reorganization plan is developed in advance with the aid of its creditors. Unfortunately for those which wished to see the company exit bankruptcy quickly, unsecured creditors successfully challenged the pre-packaged plan and were granted the right to file an alternative plan.

The latest publisher to seek bankruptcy protection in 2009 is Heartland Publications LLC, which filed for Chapter 11 bankruptcy protection on December 22nd. Heartland, which publishes twenty-three daily newspapers, is preparing to transfer ninety percent of its ownership to its senior creditor, GE Capital, and the remaining balance of its ownership to its largest unsecured creditor, the hedge fund Silver Point Finance LLC.

Broadcasters NextMedia Group Inc., Citadel Broadcasting and ION Media Networks Inc. and magazine publisher Reader's Digest Association Inc. are among other media companies which filed for bankruptcy protection in 2009. The Sun-Times Media Group, which publishes the Chicago Sun-Times, and the Journal Register Co both entered and successfully exited bankruptcy in 2009.

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