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Lee board of directors under investigation; works to re-finance $775 million debt

Globe Gazette parent company under investigation.
Globe Gazette parent company under investigation

NEW YORK – A national securities firm in New York City is investigating the board of directors at Lee Enterprises – the parent company of the Globe Gazette – for potential breaches of its fiduciary duties.

Juan E. Monteverde, a partner at Faruqi & Faruqi, LLP, a leading national securities firm headquartered in New York City, is investigating the Board of Directors of Lee Enterprises, Incorporated (“Lee” or the “Company”) (NYSE: LEE) for potential breaches of fiduciary duties in connection with their conduct in seeking shareholders’ approval for the amendment to the Company’s Amended and Restated 1996 Stock Plan.

Specifically, in the Proxy Statement filed by the Company with the Securities and Exchange Commission on January 10, 2014, the Board of Directors recommends that Lee’s shareholders vote to approve the Amended and Restated 1996 Stock Plan to increase the number of shares available for issuance by 300,000. The issuance of the additional shares could have a substantial dilutive effect on the shares of Lee common stock.

Meanwhile, Lee announced an effort to re-finance crushing debt that the company has carried for years.

The company said Monday that it has reached agreement with a group of lenders to refinance its $175 million of second lien debt with a new $200 million facility, extending maturities from April 2017 to December 2022.

The refinancing will reduce the interest rate of Lee’s second lien debt to 12% from 15% and is expected to close within 60 days.

Mary Junck, chairman and chief executive officer, said: “This agreement both lowers our interest cost and gives us an even longer runway to continue reducing debt aggressively. We are now setting our sights on refinancing our first lien debt and expect another successful outcome.”

Carl Schmidt, Lee vice president, chief financial officer and treasurer, said lenders in the second lien refinancing will receive warrants to purchase a total of 6 million shares of Lee common stock, which will represent, after full issuance, approximately 10.1% of shares outstanding.

The current first lien debt totals $600 million and matures in December 2015.

In November, Lee announced that cost cutting was improving the company’s financial outlook, saying that compensation decreased 9.3%, with the average number of full-time equivalent employees down 8.4%. Newsprint and ink expense decreased 22.3%, primarily a result of a reduction in newsprint volume of 19.4%. Other operating expenses decreased 7.6%.

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