by Mark Hengel
Posted 6/30/2008 12:00 am
Updated 12 months ago
Sources have confirmed that the Log Cabin Democrat of Conway has stopped contributing to its employees' 401(k) retirement plan.
The Cabin is owned by Morris Communications Co. of Augusta, Ga., and the penny-pinching measures are most likely an attempt to help the company pay down its existing debt and avoid defaulting. The company filed a report with the Securities & Exchange Commission saying it might default on its loans by Dec. 31, according to a Bloomberg story.
"The problem that newspaper companies are having, especially those that are heavily leveraged, is that the cash flow is getting tighter," John Morton, a media columnist for the American Journalism Review, said.
Metro Spirit, an alternative weekly in Augusta, reported in February that Morris' profits had fallen steeply since 2005, and it recently sold 17 papers in the Midwest to pay down its debt. Problem is that the $85 million banked in the sale paid the debt down only to $416 million.
Morton, speaking before the Cabin's cutbacks, said Morris, like many other newspaper companies, has seen a drop in advertising revenue. That means Morris is in danger of violating the cash flow-to-debt ratios outlined in its loan agreements.
Morton said there are two likely - though uncreative - ways for the company to cut costs.
"One way you might be able to forestall some is to sell properties. Unfortunately, this is a horrible time to be selling a newspaper," said Morton, who also is president of Morton Research Inc., a media research firm. "The other way it could impact ... their properties is, typically when this starts happening, they could cut back on the budgets, specifically in the newsrooms."
Rolling back 401(k) contributions likely is the beginning of budget cutting; it remains to be seen what else the company will ask the Cabin to skimp on.
A more interesting question is whether Stephens Media Group of Las Vegas will be able to buy the property. It's no secret that Stephens Media, owned by Little Rock's Stephens family, would love to add the Cabin to its stable of central Arkansas newspapers.
Mark Magie's family sold five Arkansas papers to Stephens in 2006. In an Arkansas Business story, he took a stab at outlining Stephens Media's plans.
"If you plot out all the central Arkansas operations they control, they are making a ring around Little Rock," Magie said. "If they could get Benton and Conway, they would have it pretty well sewed up."
Stephens Media owns papers in Maumelle, North Little Rock, Cabot, Sherwood, Jacksonville and Lonoke. Having failed in its attempt to buy the Benton Courier, Stephens launched the Saline County Voice last year.