Report: Blackstone- and Providence-backed media company teeters on verge of bankruptcy

Newspaper owner Freedom Communications, which the mega-firms helped recapitalise in 2004, is reportedly on the verge of a bankruptcy filing.

Newspaper owner Freedom Communications, which is part owned by The Blackstone Group and Providence Equity Partners, is on the verge of a bankruptcy filing as it teeters under a heavy debt load, according to the Wall Street Journal.

The company owns more than 30 newspapers, including the Orange County Register.

Freedom has $770 million in debt and has been cutting costs over the past few months as it holds restructuring negotiations with its lenders. In July, it issued a 5 percent across-the-board wage cut at all levels of the company.

Blackstone and Providence helped recapitalise the company in 2004 with an investment of between $1.5 billion and $2 billion, according to media reports at the time. The investment gave the firms a 45 percent share in the company, but a bankruptcy filing would likely wipe out their stakes.

Freedom would be the latest private equity-backed newspaper company filing for bankruptcy in less than a year. Last December, Tribune Company, the publisher of the Chicago Tribune and the Los Angeles Times, filed for bankruptcy under $13 billion of debt. Tribune was taken private in an $8 billion leveraged buyout by real estate mogul Sam Zell.

Avista Capital-backed Star Tribune Co., which owns the Minneapolis Star Tribune, filed bankruptcy in January under its debt of $661.1 million. Avista bought Star Tribune for $530 million in 2007 from McClatchy Company.

Even mega-investor Warren Buffett, who owns the Buffalo News and a stake in The Washington Post, said at a shareholders’ meeting in the spring that newspapers have the potential for “unending losses”.

Despite the pain in the industry, some firms have continued to pursue newspaper companies. Platinum Equity, which specialises in turnaround situations, bought the San Diego Union-Tribune for an undisclosed amount in March.