Good to see you back on the board. LEE spent over $30M in 2014 to refinance the debt for the best deal they could get to extend the maturities way out to 2019 and 2022 so they did not have to worry about refinancing and took bankruptcy worries out of the picture. The first term loan should be extinguished in 2018 (due 2019) at which point LEE will start to pay a small dividend to shareholders. The 2nd term notes (12%) due in 2022 will be likely paid back in 2020 from ongoing stable cash flow. They can start paying this debt back at par in 2017. The remaining Notes (9.5%) will likely be refinanced in 2020 would be my best guess.
Hope you are taking advantage of these gift prices the market is offering for LEE. I added to my position this past week.
Agreed. Cash flow is the name of the game and LEE will generate strong cash flow for years to come. The digital growth will continue to grow nicely and eventually will overcome the print revenue decline. LEE will continue to pay to the down the debt as they have in the past, almost $1B in the last decade. Buying shares at this pricing is a gift.
Two reasons - Newspapers and Debt. The market loathes newspaper companies, particularly ones loaded with debt, i.e. LEE. Revenues have been declining for over a decade and likely will continue to decline in 2016. Only 44% of the shares are held by institutional investors and only one analyst follows LEE for which a BUY rating was given.
LEE saddled itself with huge debts in an ill-timed purchase of Pulitzer over a decade ago just as print revenues started to decline. LEE has adjusted with prudent cost control and has been moving to transform into a digital media provider in its markets. Its near monopoly in most of its small/medium markets provides strong cash flow that has enabled it to pay down almost $1B in the last decade. It had $163M of EBITDA last year and this strong cash flow will continue for years to come with debt continuing to be paid down.
LEE has been growing its digital revenues very nicely at a 16% CAGR. If you just assume the digital revenue growth at only 12% going forward, print declines 15% annually going forward (LEE’s print decline has been single digits) and subs are flat, the revenue decline will bottom by the end of the decade with EBITDA still above $130M per year at the trough, more than ample to pay down debt and eventually start paying a dividend (2019 most likely).
LEE is a screaming BUY. The only analyst who has taken the time to review the company agrees. The market is very short term focused. For a long term investor, this stock will be a multiple bagger from a $1.25/share price.
Some good comments to add to the conversation giving Bama more information/perspective about LEE. I have added to my LEE position by about 50% in the past month. But I by no means advocate putting all ones eggs in one basket. For value investors, a lot of good opportunities out there. In the past two months, besides LEE, I have bought F, CMI, GME, POT, GEF, IPHS, RYAM and SSI. I also like GRMN but have not pulled the trigger on it as I think it will break below $30.