Monday, March 23, 2009

About AH Belo and EBITDA

A commenter has posted this and I thought it needed it's own posting.
Is this person correct? Read for yourself:

While I am not an expert in corporate finance, I am concerned about AHBelo's cash flow and its loan obligations to its lenders.

The information I am going to refer to is in the company's annualreport (10-k report), available on the web at

Here is a summary of that it says regarding its credit arrangements with the banks:

-- On February 4, 2008, the Company entered into a $100 million credit agreement with JP Morgan Chase Bank, J.P. Morgan Securities, Banc of America Securities and Bank of America. At that time the company had no debt.
-- As of September 30, 2008, the Company was not in compliance with the credit agreement. The company has used $10 million of its line of credit.
-- During the fourth quarter of 2008, the Company's bank group approved an amendment credit agreement. (In part reducing the line of credit to $50 million.)
-- On January 30, 2009, the Company amended its credit agreement again. Among other matters, the amended credit document creates a line of credit secured by the Company's accounts receivable, inventory, real property and other assets; and sets earning benchmarks that the company must meet.

Under the credit agreement the Company must meet the minimum adjusted EBITDA (Earnings Before Interest Taxes Depreciation and Amortization) as outlined below:

For the six months ended March 31, 2009: -$4,000,000 (a negative number)

For the nine months ended June 30, 2009: $6,500,000

For the 12 months ended September 30, 2009: $15,000,000

For the 12 months ended December 31, 2009: $22,500,000

The key question is whether the company and meet these benchmarks. If it doesn't, several things could occur:
-- AH Belo renegotiates its credit agreement
-- The banks foreclose on AH Belo's property
-- The company goes into bankruptcy

My question: How realistic is it that AHBelo will meet any of those goals? Do we hit the wall at the end of the month?


  1. I don't see how they even have the cash-on-hand to operate. It looks like the first milestone of MINUS $4 million will be tough enough but to make a $10 million swing in 3 months? I'd say Chase and BOA will soon be the proud owners of a daily newspaper. You think the Belo managers are bad try working for bankers; I have done both. God Bless you everyone.

  2. I think this is why we're paying for our own pizza.

  3. Considering the downward spiral of print media -- something I know from experience even the people brought into the company in the last year for the explicit purpose of bailing A.H. Belo out are in denial about -- it seems as if the banks would indeed find themselves co-owners of a dying breed. The only thing that might save the company is Texas credit laws...if they apply to companies like they apply to individuals, the worst thing Chase and BOA could do would be ruin the company's credit.

    The spinoff was really kind of stupid if the board actually expected to save the papers, but a stroke of luck for BLC. That arm of the company went necrotic quick.

  4. This is the take from a veteran business consultant: "One thing that I quickly noted was that the auditors did not render a going concern opinion (dated as of last week) so they think after all their analysis that the company going down is not likely in the next twelve months (ending March 2010). This analysis is very detailed and subjected to a lot of skepticism, so the evidence that the lenders hurdles will be met must be pretty likely in their eyes."