Bankruptcy judge John Dalis approved the prepackaged Chapter 11 bankruptcy plan of Morris Publishing Group clearing the way for the company to exit Chapter 11 bankruptcy by March 1, 2010.
The restructuring plan approved Wednesday includes a bond swap that trades the company’s existing unsecured debt for $100 million in new bonds – erasing $178.5 million owed to creditors.
Morris will further reduce its debt by paying back $110 million of $136 million in debt owed to banks using funds generated by the company’s sale of a majority stake in its billboard advertising business in October.
Also, the current owners of Morris will retain control of the privately held company with creditors receiving no equity.
Morris Publishing is one of at least 14 newspaper owners who have filed bankruptcy since 2008. Due to the recession and a significant drop in advertising revenue, Morris became saddled with debt they couldn’t repay which was mostly incurred during its acquisition of newspapers in the 1990s.
When the company filed for Chapter 11 bankruptcy in January it had $482.4 million in debt and only $175.5 million in assets. The massive reduction in this company’s debt load during Chapter 11 bankruptcy is just the most recent example of how bankruptcy can even help businesses who are in industries experiencing significant turmoil. Without bankruptcy, Morris Publishing may have perished during this recession and along with it many local newspapers. With the help of Chapter 11 bankruptcy, Morris is able to continue its business, reduce debt and continue to provide a much needed service to communities around this country.