MediaNews to use bank borrowings for purchase of two newspapers from McClatchy

By Sara Rosenberg

New York, April 26 - MediaNews Group Inc. plans on using bank borrowings to fund the acquisition of two northern California papers from The McClatchy Co., according to a news release.

Bank of America has committed to provide the loan financing.

Under the acquisition agreement, MediaNews is buying the San Jose Mercury News and Contra Costa Times. The newspapers are currently owned by Knight-Ridder Inc., which McClatchy agreed last month to acquire.

MediaNews plans on contributing the two newspapers to California Newspapers Partnership, owned 54.23% by MediaNews. Gannett and Stephens Media, the remaining partners, have committed to contribute their share of the purchase price.

McClatchy has also agreed to sell two other Knight-Ridder papers to Hearst Corp. - the Monterey Herald and the St. Paul Pioneer Press.

Under a separate agreement between Hearst and MediaNews, Hearst has agreed to contribute the St. Paul Pioneer Press and Monterey Herald to MediaNews in return for an equity investment in the non San Francisco Bay Area assets of MediaNews, subject to, among other things, regulatory approval. In the event such transaction is not consummated, MediaNews has agreed to acquire these newspapers from Hearst.

For the sale of the four newspapers, McClatchy will receive $1 billion in cash. Net after-tax proceeds of about $700 million from these four sales will be used to pay down debt incurred from the pending acquisition of Knight Ridder.

As was previously reported, McClatchy plans on getting a $3.2 billion senior unsecured credit facility (Ba1/BBB) via Bank of America and JPMorgan, consisting of a $1 billion revolver and a $2.2 billion term A, as well as a $550 million bridge loan for the Knight-Ridder acquisition.

MediaNews is a Denver-based newspaper company.

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