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Lee Enterprises withdraws $1B refinancing plan

DAVENPORT, Iowa (AP) — Lee Enterprises Inc., publisher of the St. Louis Post-Dispatch and dozens of other daily newspapers, on Monday withdrew a plan to refinance about $1 billion in debt that matures next April. The company cited poor market conditions.

Since April 11, when the company announced its refinancing plan and also warned of a revenue decline for the first three months of the year, Lee's stock price has fallen 57 percent. The stock fell 14 cents, or 10 percent, Monday and closed at $1.29.

Before the market opened, Lee reported a loss for the latest quarter. The announcement on refinancing came after the market closed.

"The proposed offerings did not result in terms and conditions that met our expectations or recognize the future value we expect for Lee stockholders," Chairman and CEO Mary Junck said in a statement. "We will continue to pursue alternatives and intend to refinance our long-term debt before it matures in April 2012."

The company declined further comment.

Mike Simonton, a newspaper analyst with Fitch Ratings, said the market was unlikely to get much better for Lee.

"If the company was unable to reach acceptable terms in this environment, it could prove challenging to get a comprehensive restructuring completed," he said in an emailed statement to The Associated Press.

Earlier Monday, Lee said it lost $1.5 million, or 3 cents per share, in its fiscal second quarter, which ended March 27. A year ago, Lee had net income of $3 million, or 7 cents per share.

Excluding special items, the company said it lost 5 cents per share, compared with a gain of 1 cent per share a year earlier. The special items this year included a pre-tax accounting gain of $2 million related to changes in its retirees' medical plans. A year ago, Lee had an accounting gain of $13.9 million related to a union contract approved at the Post-Dispatch.

Revenue at Lee declined nearly 4 percent to $179 million from $186 million. Lee had warned on April 11 that its revenue would be lower because of a later Easter; the decline was within the guidance it gave.

Newspapers typically get a boost in advertising revenue in the weeks leading up to the holiday, which fell on April 24 this year.

"We expect year-over-year revenue comparisons to improve again as economic conditions in our markets also improve," Junck said in a statement.

The results reflect an industrywide decline in newspaper advertising revenue.

At Lee, advertising revenue declined 5 percent from a year earlier to $124 million. The decline had been nearly 2 percent in the previous quarter. Digital advertising revenue grew in the most recent quarter by 26 percent to $14.3 million and represented about 11.5 percent of total ad revenue. Still, that was not enough to offset a drop in print advertising revenue.

Free cash flow fell 37 percent to $11.3 million from $17.8 million a year ago. The company said it had $30 million in cash and investments and long-term debt of $1 billion as of March 27.

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