Analyst says GateHouse stock may be worthless

GateHouse Media Inc., a privately held firm that had been buying up small to mid-size newspapers left and right, is in trouble. The Morningstar stock-analysis firm "released a trenchant report declaring shares of the acquisitive community newspaper publisher 'could be worthless'," Mark Fitzgerald reports for Editor & Publisher. "Morningstar also said GateHouse is close to violating one or more of the covenants on its huge debt." Stock analyst Tom Corbett wrote, "Should that happen, its debt could become due immediately, resulting in a possible liquidation scenario."

The company's stock hit a 52-week low of 98 cents a share today. It had traded as high as $19 in the past year. "Corbett said GateHouse's concentration in small markets with long-established monopoly papers has not insulated it from a flawed strategy of taking on big debt for acquisitions, and paying out large amounts of free cash flow for higher-than-average dividends," E&P reports. (Read more)

Gate House says it has 98 daily newspapers; the E&P International Yearbook database lists it with 103. The 10 largest are the Journal Star in Peoria, Ill., rounded circulation 65,000; The Repository of Canton, Ohio, 64,000; the Rockford (Ill.) Register Star, 56,000; the Patriot-Ledger of Quincy, Mass., 51,500; the State Journal-Register of Springfield, Ill., 50,000; the Observer-Dispatch of Utica, N,Y., 40,000; The Enterprise of Brockton, Mass., 30,000; the Norwich (Conn.) Bulletin, 22,600; the Metrowest Daily News of Framingham, Mass., 22,500; and The Times-Reporter of New Philadelphia, Ohio, 22,100. About 50 of the compoany's dailies have circulations of 5,000 or less.

Gate House says it has 292 weekly papers; E&P lists 278, and categorizes 212 of them as "community weeklies." Almost half those titles are in Massachusetts. The largest are North Shore Sunday in Beverly, Mass., rounded circ. 53,000; the Downers Grove (Ill.) Reporter and its sister Suburban Life, 40,000; The Country Gazette, Milford, Mass., 30,000; the Dover (Del.) Post, 29,000; The Suburbanite, Akron, 26,000; the Woodridge Reporter, Downers Grove, 23,000; and the Brandywine Community News, Hockessin, Del., 23,000. For regional lists of GateHouse publications, from the company's Web site, click here.

UPDATE, July 18: Rick Edmonds, media-business columnist for The Poynter Institute, takes a closer look at GateHouse.