The day that I started work at my law firm we inherited a case involving the New Haven Register. Since I had just started, and had nothing else to do, I carried a briefcase for the senior partner working on the case, on which we made a lot of money. At that time, the Register was owned by a trust set up by its founders, in which each of his children had a share. Several beneficiaries of the trust brought suit against the trustees. It was a long running family feud, played out in the courts. We arrived in the last act. The denouement involved the sale of the paper to what I believe is its current owner, for a large sum of money.
The Register is now owned by the Journal Register Co. and appears to now be worth a lot less than the amount for which it was sold back in 1986. In fact, the Journal Register Co. is on the verge of bankruptcy, but not necessarily because the Register is not worth anything, or because it could not turn a profit as a free standing enterprise.
Journal Register has said it is exploring strategic alternatives, including the sale of all or some of its assets, which include the New Haven (Conn.) Register, The Trentonian in Trenton, N.J. and about 20 other dailies.
The paper is burdened by big debt taken on to finance a disastrous purchase of a cluster of suburban Detroit dailies. It has warned in regulatory filings that it expects to be in violation of its loan covenants by July 23. Journal Register (Other OTC: JRCO.PK) was delisted from the New York Stock Exchange earlier this year, and now trades on the Pink Sheet.
Journal Register stock closed Wednesday at 14 cents a share, giving it a market capitalization of $5.5 million.
I don’t remember what the Register (just a part of the Journal Register Co.) sold for in 1986. I do remember that the plaintiffs suing the trust felt it should be sold for about $24 million, but it eventually sold for far more than that. Now the whole kit and caboodle is worth 5 million dollars.
It’s a shame to see a newspaper at risk, not because it failed on its merits, but because it couldn’t generate enough income to pay off loans for purchases from which it gained no advantage. I’m no economist, but it seems self evident that something has to give when a business is saddled with a large amount of debt incurred for purposes entirely extraneous to its own operations. The same would apply, it seems, in the case of a business bought on credit, which must then earn sufficient money not just to turn a profit, but to pay off a mortgage on itself that previously did not exist. This is particularly true if the business in question has a relatively slim profit margin. The preferred method of the modern capitalist to solve this problem is to cheapen the product, in the expectation that the customer won’t notice. Sometimes they don’t, but often they do, and the company dies, crushed by debt. In addition to the Register, we may lose the Courant (not that it’s worth that much at the moment) for exactly that reason.
