I noted a while back that Media General, the parent company of several Virginia newspapers, including the Richmond Times-Dispatch, is considering offers on its newspaper holdings. Now Style Weekly, through the pen of my friend Peter Galuszka, offers juicier, details:
Confronting loan deadlines, incrementally tougher terms and talk of bankruptcy, the company recently begged for a short-term bridge loan. Shortly afterward it formally announced that it’s putting all of its newspapers, including the Times-Dispatch, on the block.
The company reported a net loss for last year’s fourth quarter of $3.3 million. Income in that quarter was $4.5 million, roughly half what it was in the fourth quarter of 2010. In Tampa Bay, Fla., Media General’s most important and troubled market, the company announced in December that it was laying off 165 people, or 16 percent of its work force at its Tampa Tribune newspaper and some related units. Last fall ratings agencies Moody’s and Standard & Poor’s lowered the company’s credit rating. And Moody’s is considering another downgrade.
How did things come to such a pass? Management is partly to blame:
What makes Media General’s plight so acute is that it’s still staggering under the debt from paying far too much for four television stations in 2006, analysts say. That year Media General paid $600 million for NBC stations in Raleigh, N.C.; Columbus, Ohio; Providence, R.I., and Birmingham, Ala. That same year it was unloading its stations in Chattanooga, Tenn., and Mason City, Iowa for $22 million and $35 million respectively — underscoring the high premium Media General paid for the four NBC stations.
Stock analyst Amit Chokshi, owner of Kinnaras Capital Management, a hedge fund based in Norwalk, Conn., blames the debacle on Media General Chief Executive Officer and President Marshall Morton. “Media General’s management team is pathetic and created all of its current problems from poor acquisitions to missed opportunities,” says Chokshi, who writes for the Net-based investment blog, Seeking Alpha.
Media General’s spokesbeing dismissed such comments and questioned whether Chokshi really knew what he was talking about. Fair enough, let’s go back to an investors’ call last fall, where Mario Gabelli and others raked Media General’s CEO, Marshall Morton, over the coals:
“Your stock is at $1.30 … your debt is selling at 75 cents on the dollar,” noted Mario Gabelli, head of the eponymous Gabelli & Co., during the call. “Where are you thinking about in terms of taking good assets and bad assets and dividing them up? I’m trying to figure out how to make money on the stock.”
Marshall Morton, Media General president-CEO, sounding defensive, responded: “We have not looked at breaking the company into pieces.”
Gabelli wasn’t finished: “Have you talked with your auditors about the going-concern clause? Are you negotiating with banks to reduce the covenant coverage?”
Morton eventually conceded that asset sales were an option:
“Every asset we have is for shareholder value,” Morton responded. “If we see someone who values it more than us, we’d have to think about (monetizing) it.”
So who might be looking to pick up the pieces?
Chokshi says that potential buyers could include Halifax, conservative Colorado billionaire Phillip Anschutz, the Daily Journal Corp. of Los Angeles and A.H. Belo Corp. of Dallas.
Interesting. Anschutz’s Clarity Media Group runs the Washington Examiner and The Weekly Standard, among other properties. With a bit of trimming, the RTD might fit in well under such an umbrella.
