Thursday, July 03, 2008

Dean Singleton Memo

Talk of MediaNews' financial problems is nothing new. But the news that Standard & Poors Ratings Services has lowered the company's credit rating has again raised questions about the stability of the newspaper chain.

MediaNews is one of several media companies that have way too much debt and could be in danger of going bankrupt, according to recent articles.

Today, MediaNews CEO Dean Singleton responded to those reports with a memo to employees.

Here it is:

TO: All MediaNews Group Employees

FROM: CEO Dean Singleton and President Jody Lodovic:


Many of you have probably heard or read the recent negative press surrounding
the newspaper industry, including MediaNews Group. The focus on MediaNews Group
was prompted by a recent downgrade by Standard & Poors. Given the speculation and
innuendo contained in recent stories, we wanted to provide as much clarity to each of you as possible.

Before getting into specifics, we want to put the recent S&P downgrade into
context. MediaNews is not alone, nor is the newspaper industry unique. Unprecedented
turmoil in the financial markets and the economic challenges faced by many industries
has resulted in a great deal of dislocation and irrational behavior in the market place.

Rating agencies such as S&P and Moody's have been criticized and threatened for not reacting quick enough to update their ratings. It is our opinion (shared by others) that the rating agencies have now gone to an extreme and are being overly conservative with their ratings. As a result, every newspaper company, including MediaNews Group, has been downgraded multiple times during the past year. While we can debate whether these downgrades were warranted, we acknowledge that the economic headwinds we (and many others) face pose a real challenge. Let us assure you, MediaNews Group is up for the challenge!

We also want to address the speculation regarding the recent leadership changes
at Hearst. While it is not appropriate for us to address the specific reasons for the change, we can tell you that Hearst remains committed to and supportive of MediaNews Group. In fact, we expect to announce another transaction with Hearst shortly which will better position us to weather the current economic storm. We and Hearst have identified several areas where we can work together for our collective benefit, as well as for the potential benefit of the industry. Some of these strategies, such as our joint Kaango and PSA investment and formation of the Yahoo! consortium, are already underway. We look forward to expanding our efforts with Hearst in the future.

Aside from the matters addressed above, we are sure other questions come to
mind about the future of newspapers and MediaNews Group. Let us address a few that
come to mind.

Is MediaNews Group meeting financial commitments under the terms
of its various debt agreements?

Yes, MediaNews is in compliance with the terms of its bank
agreements and continues to take steps to reduce its total debt and
expects to remain in compliance in the future. As has been the case
in the past, MediaNews may from time to time seek amendments
of its debt agreements as necessary to provide maximum

Is MediaNews concerned about the level of its debt?

Certainly, given the economic environment we are in, we would
rather have less debt. But, this is not our first rodeo. In the last
newspaper recession (in the early nineties), we operated with
higher relative levels of debt. We came out well positioned and
led the industry in growth for much of the next decade. With our
collective efforts, we will lead the charge again!

Is MediaNews looking to buy more newspapers in the near term?

While Mediapews believes the future of newspapers is bright,
MediaNews is not currently looking to acquire more newspapers.
We believe our resources should be more internally focused on
reinventing our current newspaper model to support future growth
plans. That said, we believe that consolidation within the industry
is inevitable and will help facilitate the change necessary for
newspapers to thrive well into the future. MediaNews expects to
be a leader in that consolidation effort.

MediaNews has always been focused on cutting costs. Is there a
different strategy for the future?

Unfortunately, all newspapers are faced with making significant
cost cuts. Declining revenue and higher newsprint prices, as well
as ever increasing benefit costs, simply leave no choice.

The recent necessary downsizing at some of our newspapers was a
difficult decision, from both a personal and professional
perspective, and we will certainly miss our cohorts. Each played
an important role in the company, and there departure, through no
fault of their own, leaves a whole that the rest of our employees
will have to find a way to fill.

MediaNews doesn't believe cost cutting is a long term strategy.
However, we recognize that there is a structural change in our
business, and we must align our cost structure accordingly. That is
precisely why we engaged Bain last Fall - to provide us a roadmap
to build the newspaper company of the future by leveraging the
vast resources of the entire company. Individual newspapers can
only cut costs so far without impacting the perceived value to
advertisers and readers. Accordingly, we must work together (as
well as with other companies) to find new and creative ways to
streamline operations in ways that are transparent to both readers
and advertisers. In fact, we believe it is possible to improve our
products and services and operate more efficiently at the same

Unfortunately, gone are the days where we can operate as a
collection of standalone newspapers. We must leverage our
collective resources and position ourselves to reinvest in our
business going forward in order to provide the tools and resources
to ensure success in the future. And, we are starting to do just that,
with significant investments in the sales, marketing and research

We hope that this addresses many of your questions and conveys
MediaNews Group's commitment to taking the necessary steps to ensure our
future success. No one said change was easy, and the current economic
environment makes it all the more challenging. But the rewards for successfully
navigating through this period of transformation will be great.

We truly believe in the future of newspapers, the services they perform
and the value they provide. You, our employees, are our most valuable asset.
And, if we all work together, MediaNews will lead the industry into the future!
We recognize and appreciate your efforts and dedication during this
challenging time.

Remember: Together we can!