Newspaper publishing company Gannett Co. (NYSE:GCI) put on a happy face for its second-quarter earnings results Wednesday, announcing that it earned 30 cents per share compared to a net loss of $10.03 in the same quarter last year. Excluding items, Gannett would have earned 46 cents a share in the second quarter, compared to the year-ago adjusted profit of $1.04 a share.
But behind those smiles is a sickening helplessness that the company is being held hostage by loan maturities within the next three years and credit default swaps, which The Deal's Richard Morgan says makes the McLean, Va.-based company "lucky to last through June 2011." (See The Deal magazine story, The default option.)
Morgan points out that according to the Depository Trust & Clearing Corp., the gross notional value of outstanding CDSs referencing Gannett is $30.9 billion. That exorbitant amount means a good portion of bondholders who also own the CDSs would rather see the company default rather than extend the maturity of the bonds. That's more than apparent since Gannett said in its second-quarter earnings release that it has extended the maturity on 25% of its bonds to 2015 and 2016. That small percentage still does not seem enough and will push Gannett to the brink.
It doesn't help that the slow economy is choking its primary revenue source: advertising. The company said publishing advertising revenue has stabilized but still fell 32% to $753.1 million. Additionally, Gannett announced another round of layoffs of 1,400 employees just days ago at its community newspapers. - Gerald Magpily
