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Another Ch.11


Guest kawikaho
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Another print media publisher bites the dust.  This one hit me hard, though, since I've grown up with Surfer and Surfing for 20 years.  Those magazines are icons in the industry, and have been around as long as Pontiac has.  Although, it shouldn't have been too surprising, given the fact that they had only 10 million in assets to offset 1 billion in liabilities.  Holy crap.

 

Anyone else think print media is going to completely die out in 50 years?  With the Internet, eBooks, and whatever new thing comes on the horizon, I think print media will go the way of the dodo bird.  Music stores and book shops will become a thing of the past.  What interesting times we live in.

 

29 April, 2009 : - - The economic situation in our country has not only hit the retailers and brand name companies in our industry, it has also taken its toll on the material we read. Source Interlink, the company that publishes Skateboarder, Snowboarder, Surfing, Surfer and five other action sports magazines and web sites, said today that it has filed for Chapter 11 bankruptcy.

 

The special interest media company, in total, publishes a total of 75 magazines and 90 web sites, described the bankruptcy as a prepackaged filing. According to the company’s website: “A “pre-pack” is a court proceeding in which the creditors will be paid in full or have agreed to take less. It is used to implement a restructuring of a company’s capital without disturbing its daily operations. A “pre-pack” is the quickest and easiest form of restructuring through the bankruptcy courts. Using this method, we expect to complete our restructuring in about 30 days.”

 

The statement also addresses the status of the companies immediate operation, “First and foremost, Source Interlink Companies wants to assure you that Source is continuing to operate its business without interruption.” The statement also goes on to say, “While we restructure, we plan to continue providing our customers with the outstanding service they have come to expect. We will continue to partner with our advertisers, publishers and vendors to ensure that the reorganization process is transparent to those we serve.”

 

According to Shop-Eat-Surf.com, in documents filed with the U.S. Bankruptcy Court in Delaware yesterday, Source Interlink estimated that its assets range from $1 million to $10 million, but that its liabilities exceed $1 billion, and that it has 50,000 - 100,000 creditors.

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Yes, the print media is undergoing a very large change. However, the companies with the biggest problems also have a massive amount of debt (LBO or, like Canwest, they bought at the top off the market). Is print the real problem or is it a balance sheet issue?

 

A small media company I hold a small position in is Glacier Ventures (GVC). Among other things, they publish local newspapers in many small communities in Western Canada. Lots of free cash flow that they are using to either pay down the small amount of debt they have or to  make aquisitions. Got this one from Francis Chou (one of his holdings in both Asia and Europe funds).

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I also own GVC it appears quite cheap here I suspect that they will be picking up some of the Canwest assets. The community papers will survive in their present format as they have been based on a free subscription model for a long time most serve as just a journalistic wrapper for flyer distribution. If they could also negotiate a merger with Black out of Victoria I think you could have a Cdn institutional sized entity. Management seems to be quite focussed on keeping their head down and running an efficient operation. I also purchased Yellow pages I am not sure if it is just a cigar butt or not it is being heavily shorted and of course the short arguement is that it is a buggy whip co. however I think the impending bancruptcy of the overlevered US companies in the same space may be clouding some investors thinking. If I was driving the bus at yellow pages I would be in intense negotiations with Google to establish a joint venture then acquire the US assets no one is better than Google at monetizing revenues on a search basis which is the model I am sure we will end up with

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Advertising revenues are down... the lifeblood of the publishing industry. There has been a wave of consolidations (levered) over the past decade, where newspapers and magazines

were bought at the top of the market for too much money. What we are witnessing is a business cycle in action, with creative destruction of the overlevered and undersubscribed.

Too bad we didn't "let" the bad banks and car companies go bankrupt sooner.

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