New York investment firm paid $87 million for newspaper group

Newcastle Investment Corp. said today it is the new owner of the Dow Jones Local Media Group, which includes the Mail Tribune and Daily Tidings.

The New York firm paid $87 million to acquired the Local Media Group from News Corp., making an equity investment of $54 million, including transaction expenses, while financing the remainder of the purchase price with $33 million of debt.

When the transaction was announced Tuesday, neither the actual buyer nor the purchase price were disclosed.

Newcastle Investment, which primarily invests in senior housing communities and real estate and other debt, is managed by an affiliate of Fortress Investment Group.

Local Media Group operates 33 local publications, including eight daily and 15 weekly newspapers, in seven states. As part of the deal, the Mail Tribune, Daily Tidings and Southern Oregon Nickel are now managed by GateHouse Media of Fairport, N.Y., which is an affiliate of Fortress Investment Group, Newcastle's manager.

GateHouse Media has filed documents with the Security and Exchange Commission, pointing toward possible Chapter 11 reorganization.

Newcastle, which owns approximately 52 percent of GateHouse's $1.2 billion of debt, also said it has entered into an agreement with other creditors related to a potential restructuring of GateHouse pursuant to a prepackaged plan of reorganization — a move that shortens and simplifies bankruptcy proceedings.

GateHouse owns 400 community publications — including 78 daily newspapers and 235 weekly papers — and approximately 350 websites.

Newcastle said it expects to convert its debt position into equity of GateHouse, and the other creditors will have the option to convert their positions into either equity or cash at a price of 40 percent of par, meaning previous investors will see their stake reduced by 60 percent.

— Greg Stiles

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