Newcastle eyes GateHouse restructuring, combination after acquisition

By Caroline Salls

Pittsburgh, Sept. 4 - GateHouse Media, Inc.'s debt would be restructured via a pre-packaged Chapter 11 bankruptcy under an agreement between Newcastle Investment Corp. and other creditors, according to a Newcastle news release.

Newcastle said it owns about 52% of GateHouse's $1.2 billion of debt. Newcastle expects to convert its debt position into equity of GateHouse, and the other creditors will have the option to convert their positions into either equity or cash at a price of 40% of par.

According to the release, Newcastle acquired Dow Jones Local Media Group from News Corp. for $87 million.

Dow Jones Local Media Group's operations will be managed by GateHouse, which is an affiliate of Newcastle manager Fortress Investment Group.

According to a Newcastle investor presentation released Wednesday, GateHouse became over-levered during the 2008 financial crisis.

Spinoff

Newcastle said it is considering a spinoff of GateHouse and Dow Jones Local Media Group interests to form a separate publicly traded company.

The recapitalization of GateHouse would carry an expected enterprise value of $485 million, Newcastle said in the presentation, comprised of $150 million of senior debt and $335 million of equity.

Newcastle said the combination of GateHouse and Dow Jones Local Media would have a $390 million expected equity value. At its current $230 million investment, Newcastle would own 59% of the combined company.

In addition, Newcastle said the combined company could invest $1 billion to acquire local media assets over three years.

GateHouse projections

GateHouse said in an 8-K filed with the Securities and Exchange Commission that it projects $475 million in revenue and $73 million in adjusted EBITDA for fiscal year 2013.

For fiscal year 2014, the company projects that it will achieve roughly $489 million in revenue and $70 million in adjusted EBITDA; for fiscal year 2015, the company projects that it will achieve about $510 million in revenue and $80 million in adjusted EBITDA; and for fiscal year 2016, the company projects that it will achieve $522 million in revenue and $85 million in adjusted EBITDA.

GateHouse is a Fairport, N.Y.-based publisher of print and online media.

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