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Friday, August 19, 2011

Lee Enterprises Gets Another SEC Warning -- Stock Faces Delisting

Posted By on Fri, Aug 19, 2011 at 10:45 AM

Lee Enterprises has loads of debt -- but the company's current market value has dipped below $50 million.
  • Lee Enterprises has loads of debt -- but the company's current market value has dipped below $50 million.
Lee Enterprises -- parent company of the St. Louis Post-Dispatch, the Arizona Daily Star and a number of other smaller newspapers -- has been warned a second time in as many months that it could be delisted from the Security and Exchange Commission.

The SEC warned Lee of that prospect in a letter yesterday. Previously, in July, the SEC noted that Lee's stock had dipped below $1 per share; after a brief grace period, the commission generally refuses to list stocks priced lower than $1, reasoning that they're too likely to be subject to manipulation.

In addition to that problem, in yesterday's warning, the SEC warns that it requires "average market capitalization" of at least $50 million over a 30-day trading period. The Iowa-based company is deficient on that front, too.

What that means? Based on the level that shares are currently trading, the market thinks Lee is worth less than $50 million, total. Contrast that to 2005, when Lee paid $1.46 billion for the newspapers owned by the Pulitzer family, including the P-D. Yikes!

And, of course, thanks to that pricey acquisition, Lee is saddled with nearly $1 billion in debt.
In summary: They owe $1 billion, and yet they're currently worth less than $50 million. You don't have to be an economist to realize that means trouble.

So what will it take to get back to the good graces of the SEC? Cuts alone clearly aren't going to do it -- Lee has been diligently cutting expenses for years now, but with its giant debt load, investors still aren't biting. A planned junk-bond offering had to be scrapped when the company realized that buyers just weren't there, although, in press releases, Lee has indicated that it still hopes to find a way to refinance its debt.

In the mean time, Lee says that it needs to get its stock up to $1.12 per share; if that happens, not only will it meet that whole $1-per-share requirement, but the company's total value will then exceed $50 million once again. So: If the company can pull off a 55 percent increase in its per-share price, they're golden.

Suffice it to say, that's not going to be easy in this economy (and with that debt load). We extend our sympathies to our fellow ink-stained wretches at the P-D -- as Daily RFT reported on Tuesday, Lee recently notified the union that it wants to cut more newsroom jobs. The paper already has roughly half the employees as when Lee acquired it, a union rep says.

A rough week indeed.

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