The San Jose Mercury News’ owner will seek bankruptcy protection in a major restructuring of the company’s ownership and debt, news agencies reported Friday night.
The Chapter 11 filing will slice holding company Affiliated Media’s debt from $930 million to $165 million. The negotiated transaction will cost executives Dean Singleton and Jody Lodovic ownership control.
Controlling equity in the struggling newspaper group will be issued to 116 creditors, a group led by Bank of America Corp.
Hearst Corp., which owns the San Francisco Chronicle, will see its $400 million investment in MediaNews wiped out in the proceedings, according to the Wall Street Journal. Hearst declined comment, the Journal said.
Singleton said that for advertisers, vendors, employees and subscribers, “it is business as usual,”
Singleton and Lodovic will retain control of the board, despite their diluted ownership, under the reorganization plan.
On August 2, 2006, MediaNews bought the Mercury News from McClatchy Corp. following McClatchy’s purchase of Knight-Ridder’s newspapers. Pummeled by the economy, the Internet and debt service obligations, the Mercury News under Singleton has consolidated shrunk its staff and page counts while consolidating operations and coverage with its other Bay Area publications.
Media News owns most of the daily newspapers in the San Francisco Bay Area and Monterey Bay regions, as well as the Silicon Valley Community Newspapers group of weeklies.