The Record publisher prepares for bankruptcy

Morris Publishing Group, LLC, publisher of The St. Augustine Record and Florida Times Union, gave an ultimatum to holders of their non-performing Senior Subordinated Notes — accept $100 million in second lien secured notes due in 2014 or Morris is going to bankruptcy court.

Morris Publishing is sending an offer to all holders of existing notes; asking them to surrender their existing notes, including accrued interest, in exchange for $100 million of new “second lien secured” notes that will become due in 2014.

Until Morris Publishing repays its remaining senior debt, the new notes will bear interest of at least 10%; but could bear interest up to 15%. Morris still has not paid two semi-annual interest payments totaling $19.4 million on the existing notes; they were originally due February 1, 2009 and August 3, 2009. Morris said that some of the interest on the new notes may be “paid-in-kind” instead of cash.

Morris announced last week that unless the company receives approval from the holders of 99% of their outstanding principal debt of $278.5 million, plus accrued interest, Morris Publishing will file a “pre-packaged bankruptcy plan” for the exchange of “new notes” for the “existing notes”.

Simultaneously with the exchange offer, Morris Publishing will solicit consents from the holders of existing notes for the pre-packaged bankruptcy plan.

Morris claims that holders of over seventy percent of the outstanding principal amount of existing notes have agreed to support the exchange offer — and the pre-packaged bankruptcy plan.

Upon the exchange, $110 million of Morris Publishing’s existing $136.5 million in senior debt will be satisfied or contributed to capital by affiliates of Morris Publishing.

Photo credits: © 2009 Historic City News photographer Kerry McGuire