• by Erik Sass  @eriksass1, September 30, 2013

GateHouse Media, which owns hundreds of small and mid-sized community and weekly newspapers around the U.S., has entered Chapter 11 bankruptcy protection, the company announced last week.

The filing in the U.S. Bankruptcy Court for the District of Delaware includes a “prepackaged” plan of reorganization that appears to have the support of a majority of the company’s creditors.
 
The bankruptcy filing should allow GateHouse to restructure $1.2 billion in debt scheduled to come due in August 2014, most of which was assumed by the publisher in 2007. According to GateHouse Director and CEO Michael Reed, the reorganized company will retain all its assets and reduce its debt while canceling its common stock and merging with Local Media Group, which owns eight daily community newspapers and 13 weekly newspapers.

Creditors can opt to receive a cash distribution equal to 40% of their claims, or stock in New Media Investment Group, the new company being formed by the merger with Local Media Group.

Local Media Group was created by Newscastle Investment Corp.’s recent acquisition of the Dow Jones Local Media Group; Newcastle is an affiliate of GateHouse owner Fortress Investment Group, meaning the two publishing companies are corporate siblings.

GateHouse is just the latest in a series of publishers to declare bankruptcy.

Earlier this month, FriendFinder Networks, which owns nudie mag Penthouse, filed for Chapter 11 bankruptcy protection as it struggles to deal with liabilities said to amount to $500 million to $1 billion. And Reader’s Digest Association entered bankruptcy protection from February to July of this year -- its second Chapter 11 filing, following an earlier one in August 2009 .