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The layoffs will happen in Gannett's U.S. Community Publishing division, meaning it will spare USA Today from cuts, according to a Wall Street Journal source. The bloodletting comes as revenue in the first quarter declined 60% compared to a year earlier. The layoffs are likely the first in a series of efforts to stabilize Gannett's dire financial circumstances highlighted by The Deal's senior writer Richard Morgan in his magazine cover story The default option. Morgan writes: Because of the credit crisis, an unfortunate bunching of credit maturities and a debilitating number of so-called negative-basis trades featuring credit-default swaps -- all in addition to the industry's secular and cyclical downturns -- Gannett as we know it will be lucky to last through June 2011. The company must raise $400 million between now and 2011 in a market where credit is difficult to come by compared to previous years. Meanwhile, Gannett's current junk debt rating from Moody's Investors Service will make it even harder for the company to raise capital at a favorable rate. If Gannett were able to secure funds from the public markets, it would only get piled on top of its $3.7 billion of existing outstanding debt. If things don't improve quickly, look for Gannett to make even more layoffs, but at this point it looks like it wouldn't help. - Gerald Magpily See The Deal magazine: The default option
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As Gannett Co. (NYSE:GCI) struggles to stay out of bankruptcy -- as forces beyond its control bet heavily in favor of a default -- the largest U.S. newspaper publisher plans to cut up to 2,000 more jobs from its 41,500-strong workforce. Gannett already cut 10% of its workforce last year.
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