The Train Wreck At Gatehouse Media (GHS)(MNI)(GCI)

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The next newspaper company to get into real trouble is likely to be Gatehouse Media (GHS). The firm is in bad enough shape that it could be the next Journal Register. JRC, as it was known, hit hard times due to large debt and falling operating income. It was delisted from the NYSE.

It would be difficult for any newspaper shares to be down as much as those of McClatchy (MNI), which is also burdened with debt and owns properties in the economically troubled regions of Florida and California. But, GHS shares are off 80% over the last year compared to 70% for MNI. Shares in industry leader Gannett (GCI) are down 50%.

At the end of the last quarter, Gatehouse had a little over $10 million in cash. Its long-term debt stands at over $1.2 billion. Goodwill is at just below $700 million.

During the last quarter, GHS lost $29 million on revenue of $170 million. Debt service was $24.4 million. Gatehouse has a huge dividend which it will almost certainly have to eliminate, taking away the sole reason for holding the shares.

Watch for GHS to be broken up before the end of the year or to enter Chapter 11.

Douglas A. McIntyre