In the face of the extraordinary credit crisis and economic downturn,
Lee Enterprises, Incorporated (NYSE: LEE), has negotiated with lenders
to increase its flexibility in meeting debt obligations. As a result,
Lee will facilitate the payment of bank debt through the suspension of
its dividend.
Key changes to the bank credit agreement include:
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Increase in total leverage ratio (as defined) from 5.0:1 to 6.5:1
through December 2008;
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Increasing thereafter to 6.75:1 through September 2009;
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Declining thereafter to 6.5:1 through June 2010;
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Declining thereafter to 6.25:1 through September 2010; and
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Declining thereafter to 4.5:1.
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Decrease in interest coverage ratio (as defined) from 2.5:1 to:
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2.0:1 through March 2009;
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Declining thereafter to 1.7:1 through September 2009;
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Increasing thereafter to 1.8:1 through December 2009;
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Increasing thereafter to 1.9:1 through March 2010;
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Increasing thereafter to 2.0:1 through September 2010; and
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Increasing thereafter to 2.5:1.
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Reduction in revolving credit facility from $450 million to $375
million. $207 million was drawn at the end of September 2008.
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Elimination of an unused incremental borrowing facility of $500
million.
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Grant of a security interest in certain tangible and intangible assets
of Lee.
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Reinstatement of dividend and stock repurchase permitted when Lee’s
total leverage ratio is again less than 4.5:1.
-
Increased pricing. Credit spreads will generally increase 200 basis
points from the current pricing grid. The maximum rate (for leverage
greater than 6.25:1) will be increased to LIBOR plus 400 basis points.
At the current leverage level, Lee’s debt
will be priced at LIBOR plus 300 basis points.
In discussing the changes, Carl Schmidt, Lee vice president, chief
financial officer and treasurer, said: "While
we expect to be in compliance with our leverage ratio requirement at the
end of our 2008 fiscal year in September, the credit agreement included
a reduction in the ratio beginning in the December 2008 quarter.
Accordingly, given the uncertainty of the current economic environment,
we and our lenders believed certain adjustments were appropriate at the
present time. It is encouraging that even in a tumultuous credit
environment, such amendments can be obtained. Since our acquisition of
Pulitzer Inc. in June 2005, we have repaid $463 million of debt and
reduced net debt by an even larger $486 million, and these changes,
coupled with our ongoing, across-the-board initiatives to reduce costs,
should enhance Lee’s near-term operating
flexibility, while still providing necessary liquidity.”
Mary Junck, Lee chairman and chief executive officer, said: "Like
others in our industry, we have taken these actions as a result of some
of the worst economic conditions in our lifetimes. The continuing
housing and credit turmoil, coupled with rising unemployment and tight
consumer spending, have inflicted a prolonged toll on advertising
revenue and earnings. We remain confident that Lee will emerge strong
when the economy improves, but current trends indicate a need for this
additional flexibility in meeting our debt obligations. We regret that
this additional flexibility comes at the cost of suspending our
dividend. The suspension will save $34 million per year, which will be
used to reduce debt, as will substantially all cash flows of the
business. While debt reduction ultimately benefits stockholders, we look
forward to the time when we can reinstate an appropriate dividend.”
Lee Enterprises is a premier publisher of local news, information and
advertising in primarily midsize markets, with 49 daily newspapers and a
joint interest in four others, rapidly growing online sites and more
than 300 weekly newspapers and specialty publications in 23 states. Lee’s
newspapers have circulation of 1.5 million daily and 1.9 million Sunday,
reaching more than four million readers daily. Lee’s
online sites attract 12 million unique visitors monthly, and Lee’s
weekly publications have distribution of more than 4.5 million
households. Lee’s markets include St. Louis,
Mo.; Lincoln, Neb.; Madison, Wis.; Davenport, Iowa; Billings, Mont.;
Bloomington, Ill.; and Tucson, Ariz. Lee stock is traded on the New York
Stock Exchange under the symbol LEE.
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. This release contains
information that may be deemed forward-looking and that is based largely
on the Company's current expectations and is subject to certain risks,
trends and uncertainties that could cause actual results to differ
materially from those anticipated. Among such risks, trends and other
uncertainties are changes in general economic conditions, advertising
demand, newsprint and other commodity prices, energy costs, interest
rates and availability of credit, labor costs, legislative and
regulatory rulings and other results of operations or financial
conditions, difficulties in integration of acquired businesses or
maintaining employee and customer relationships, increased capital and
other costs, competition and other risks detailed from time to time in
the Company’s publicly filed documents,
including the Company Annual Report on Form 10-K for the year ended
September 30, 2007. The words "may,”
"will,”
"would,”
"could,”
"believes,”
"expects,”
"anticipates,”
"intends,”
"plans,”
"projects,”
"considers”
and similar expressions generally identify forward-looking statements.
Readers are cautioned not to place undue reliance on such
forward-looking statements, which are made as of the date of this
release. The Company does not publicly undertake to update or revise its
forward-looking statements.
