The first big bankruptcy in newspaper industry?

Journal Register (NYSE: JRC) may be the first large, listed newspaper company to go into Chapter 11. With falling revenue and high debt, the company, which publishes a number of papers including the New Haven Register, hired Lazard as it faces delisting from the New York Stock Exchange.

JRC has been the most likely chain to hit trouble for some time. It bought a number of papers in Michigan four years ago and the deep trouble in the economy there has bedeviled the parent company. According to The New York Times, "If the company were to seek bankruptcy protection, as analysts said was possible, it would be a first in recent memory for a publicly traded newspaper company, John Morton, a longtime newspaper analyst, said."

The company's 10-K shows that revenue in 2007 dropped to $463 million from $507 million the year before. Industry analysts believe that ad revenue across all newspapers in the U.S. will drop another 8% this year.

Journal Register operating income before write-offs was $63 million in 2007, but interest expense was $41 million, leaving almost no margin for a further drop. The company has $625 million in debt.

The newspaper industry is dying more quickly now and there will be other defaults in the next year or two. Large chains like McClatchy (NYSE: MNI) face severe debt problems. Its lenders may end up owning the company.

Douglas A. McIntyre is an editor at 247wallst.com.