Living on the edge?

From Reporter-G and our own Steve Carr comes the following:

Standard & Poor analyst Emile Courtney suggests that newspaper titans like MediaNews may have have saddled themselves with too much debt, and face the very real possibility of defaulting on their massive loans by as early as December, according to Bloomberg.com.

The problem is that these empires were built like a house of cards, fueling their growth by amassing billions in debt. The article cites Mark Young, president of Grist Mill Advisors, who offers a sobering warning for media watchers.

"These companies built their portfolios using leverage and executing a strategy with an investment thesis that was clearly flawed," Young said. "Almost all of these are going to have to go through a restructuring or bankruptcy to come out the other side."

According to the article, MediaNews is facing two problems - reduce it's debt levels, and stabilize revenues. If they can't, the consequences may be dire.

On June 30, if MediaNews has the debt-to-cash flow ratio of 6.53 times it reported on Dec. 31, 2007, it would be in violation of its loans, according to S&P.