Small banks more apt to loan on local, regional newspaper transactions
Financing has become the critical component in newspaper acquisitions and those publishing companies with good balance sheets and strong relationships with healthy banks remain in the hunt for properties.
“It is a buyer’s market and there are currently a substantial number of companies that would like to purchase small and mid market publications,” said John Cribb, Managing Director of Cribb, Greene & Associates. “It all boils down to whether they can get the money to make the purchase,” he added.
In the current environment, most of the major banks are not interested in cash flow lending, especially when lending into an industry that is seen in decline and in transition.
“It is interesting,” Cribb observed, “because many of the active buyers have better balance sheets than their banks, but they can’t borrow because their banks are scared and are in a lockdown mode. “Fees and interest expense on new loans are also increasing as banks price in the risk associated with print media lending.
The one bright area of lending is small banks. “Locally or regionally owned banks are very much in tune with their communities and many of them adhered to their lending discipline during the economy’s run-up. They tend to be more inclined to work with long-time customers, such as newspapers who want to grow through acquisition,” Cribb said.
But many banks are no longer willing to accommodate the needs of their long-time print media customers and are enforcing penalties and defaults, which lead to higher bank fees. They are also charging higher fees for credit lines and loan origination.
This is causing many media companies to rethink their banking relationships and to consider finding another lender. “It is difficult to break long-standing relationships with banks, but many publishers feel they have no choice,” Cribb added.