Newcastle Investment Corp., which owns just over half of GateHouse Media, Inc.’s debt, announced Wednesday that it has reached an agreement with other debtholders to potentially restructure GateHouse’s $1.2 billion debt.
The announcement comes on the heels of the news that Newcastle bought the Dow Jones Local Media Group from News Corp. for $82 million.
GateHouse Media owns the The Wayne Independent, The News-Eagle (Hawley), Moscow Village and Carbondale News.
GateHouse Media will manage the Local Media Group newspapers, which include 33 local publications, including eight daily and 15 weekly newspapers, in seven states. GateHouse Media is an affiliate of Fortress Investment Group, Newcastle’s manager. Newcastle is a trust that focuses on investments and management of real estate and other debt, as well as senior housing.
GateHouse Media is one of the largest publishers of locally based print and online media in the United States with a portfolio of products that includes over 400 community publications and approximately 350 related websites.
The agreement among the debtholders contemplates that GateHouse Media’s debt restructuring would be under a prepackaged plan. As part of the proposed restructuring, Newcastle expects to convert its GateHouse Media debt into GateHouse Media stock, and other debtholders will have the option to convert their debt into GateHouse Media stock or cash at 40 cents on the dollar.
Newcastle also will consider a spin-off of Local Media Group and GateHouse Media interests to form a new publicly traded company, called New Media, which has an expected equity value of $390 million. As contemplated, Newcastle would then own 59 percent of New Media.
New Media could invest $1 billion to acquire local media assets over three years.
Earlier this year, GateHouse Media disclosed that it was evaluating capital structure alternatives in advance of its debt becoming due in August 2014.