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%.
Smoke and mirrors financing, the last gasp of a failing organization. Is there even enough equity left to cover the debt (in this case, journalistic reputation counts as equity).
In other publications, they have driven away good, long term talent in the quest to cut costs.
Here is how I see it, and for the record, I worked at the Globe for over 6 years before walking in and resigning, fair and square.
How many more people can Lee cut? How many more “reporters” can they axe? Photographers? For the last 10 years, Lee has fired or gotten rid of skilled, creative workers and left their jobs vacant or replaced them with salespeople. At the Globe, they let people go, advertised those open jobs, and then in some cases re-hired the same people at a fraction of their old pay. And the suckers took their old job! Do these people have any pride at all? Why do we see former Globe reporters working in Wal-Mart check-out lines, bagging groceries?
The word was that the Globe pared down their own ad design department – people that live right here in Mason City – and farmed out those jobs to people who live in India. How can management at this newspaper even show their face in public after treating their own neighbors this way? On top of that, they pay the liar John Skipper an hourly wage to mislead the few people left who read the Globe?
The newspaper itself is shrinking, getting smaller and smaller. Can this go on forever, before people stop subscribing, advertising? How long before the Globe abandons its building at 300 North Washington? Will the Des Moines Register take over this market sooner or later? We would all be better off if that happens.
All these cutbacks are why the rag sucks. They think they can starve their people so the CEO’s can make their fortunes.
Sing along now…Internet killed the radio star…