Philadelphia Media Holdings LLC, owner of the
has missed a June 1 interest payment on $85 million of loans, according to a debt-ratings agency.
Standard and Poor's Leveraged Commentary and Data unit reported that PMH did not maintain the necessary ratio of senior debt to cash flow required by its senior lenders.
The result is that senior lenders blocked the company's interest payments to $85 million in junior loans held by another group of lenders. That's because senior lenders, who hold at least $295 million in loans, want to preserve the company's cash for repayment of its own loans.
Chris Donnelly, an S&P vice president, said PMH is in talks with senior lenders to obtain a two-year relief from the required debt-to-cash-flow ratio. However the company likely will end up paying a higher interest rate on its loans as a result, he said.
Regarding the junior debt, the company is in talks to pay the interest in kind instead of in cash. Donnelly said that means the interest payment will be added to the principal loan amount of $85 million.
Future interest payments will be higher because of the bigger principal. PMH is also seeking an equity infusion of about $8 million.
The company, headed by advertising executive Brian Tierney, bought the two papers for $562 million in June 2006 from McClatchy Co.
Philadelphia Media Holdings did not immediately comment on the situation. *