Many of the large newspaper chain purchases over the last several years have involved tremendous borrowing and the banks are at the door with eviction notices. Even the big companies in the industry are having trouble. According to The Wall Street Journal, Gannett, Inc. (NYSE:GCI) the country's largest newspaper publisher, said Wednesday it had tapped its credit line as short-term financing markets stall.

Several other chains, particularly McClatchy (NYSE:MNI) and Gatehouse (NYSE:GHS) are having crippling debt problems.

A number of media sources reported yesterday that the The Star Tribune in Minneapolis has missed a payment on its debt.

Although it is hard to imagine, some of these companies may fail and fail soon. The costs of newsprint, trucks, gas, and personnel are so great that a number of newspapers may complete shut down. Customers may wake up one morning and find the front step empty. The poor newspaper boy has lost his job.

It is a hard time when there is nothing to put in the bird cage.

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

Within the past years, several public newspaper companies have been pushed to the cliff of insolvency. They have taken on too much debt and the downturn in advertising has put them in a position where they cannot cover interest payments.

Journal Register was knocked off The New York Stock Exchange and is in the process of liquidation. The value of its properties has dropped so low that its common shareholders will get nothing and creditors will not recover the amount of their loans. Gatehouse Media (NYSE: GHS) has traded under $1 for weeks and also face delisting. Odds are that its properties will have to be auctioned off.

Banks may be employing a new tactic in the hope of getting their money out of the newspaper industry. Extend loans, let the companies cut expenses to the bone, and pray that advertising will get better. If it does, they might get their money back. McClatchy (NYSE: MNI), the nation's third largest chain, was the next company in the industry to head toward liquidation. Based on a new lifeline from its creditors, it may dodge that for awhile. According to The Wall Street Journal (subscription required), "The publisher of the Sacramento Bee and Miami Herald said Friday its banks agreed to loosen restrictions on the company's level of debt compared to cash flow, and its ratio of interest payments to cash flow."

The banks are making a big mistake. McClatchy's has many of its properties in California and Florida were the economies could be troubled for years. By letting McClatchy stay in business, the banks are risking that the value of the company's papers will drop even more. If McClatchy is sold off in pieces now, creditors might get most of their money back.

The holders of McClatchy's debt may have saved the company, for a few months at least. They have also put themselves in a position to lose most of their money.

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

Tribune, formerly a public newspaper and broadcast company, lost the publisher of its largest newspaper, the LA Times, and the editor of its flagship, the Chicago Tribune. New controlling shareholder Sam Zell is in trouble, burdened by buyout debt he may not be able to pay.

Most analysts saw another modest drop in newspaper ad revenue this year. It has been much worse than that. At some companies in the industry, ad sales are off nearly 15%. An analyst recently dropped his price target on The New York Times Company (NYSE: NYT) to $8 and said the firm would have to cut its dividend. The stock currently trades at $13.21.

The two public companies which are at most risk for not making it another year are Gatehouse (NYSE: GHS) and McClatchy (NYSE: MNI). Both took on big debt loads buying newspaper properties. Both are seeing operating income chopped by falling sales. Either could hit debt service problems which could force them to sell properties of file for Chapter11.

Gatehouse dropped as low as $1.11 in the last few days. Its 52-week high is $19. McClatchy is down to $4.93 from a 52-week high of $28.65. Gatehouse is the most troubled with a high dividend and $1.3 billion in long-term debt.

Newspapers companies have gone from being in a tight spot to being candidates for liquidation. They are a short-seller's dream.

Douglas A. McIntyre is an editor at 24/7 Wall St.

The newspaper business had been bad and getting worse. Ad revenue at some large chains with properties in the hard-hit economies of Florida and California are seeing their classified businesses drop by over 30% compared with last year. A number of newspaper chain stocks are down well over 50% since the middle of 2007.

The largest newspaper company in the U.S., Gannett (NYSE: GCI), is getting ready to take a $3 billion, non-cash charge to write-down the value of its assets. The charge will cover almost 20% of the firm's total assets. According to The Wall Street Journal, "The publisher of USA Today and more than 80 other daily papers, Gannett is the latest newspaper company to take an impairment charge reflecting difficult industry conditions."

Of all U.S. newspaper companies, Gannett is the most likely to weather the current storm, unless it never ends. The firm's long-term debt is $4 billion, which is modest for a company its size. Gannett's revenue last year was $7.5 billion.

Other companies in the industry may not be so lucky. Some, like McClatchy (NYSE: MNI) and Gatehouse (NYSE: GHS) have taken on substantial debt loads to buy other newspaper companies. They may not have the operating income to cover debt service.

That means a lot of newspapers could be auctioned off later this year.

Douglas A. McIntyre is an editor at 247wallst.com and author of the Ten Stocks Under $10 letter.

The Tribune is not a public company anymore, but CEO Sam Zell says enough about his plans that it might as well be.

According to The New York Times, Zell "announced a set of deep cuts, saying that shrinking revenue left them no choice." One of the things that means is fewer pages devoted to news as newsprint use is reduced.

The Tribune carries a lot of debt, so it is in more trouble that other chains such as The New York Times Company (NYSE: NYT) and Gannett (NYSE: GCI). But, other large paper operations including McClatchy NYSE: MNI) and Gatehouse (NYSE: GHS) also have massive debt burdens from money they borrowed to expand their empires.

What all of this means is that more reporters and editors will lose their jobs and the typical reader will get a newspaper that is thin as toilet paper. For newspaper company investors it means that stocks, some already down 50% to 70% in the last year, are going down even further.

The trouble also may spell the end of nearly a century of big papers like The New York Times being the news sources of record. The company recently cut 100 people, most of them from the news operation. Covering major national and international stories is becoming more difficult and at some point it may be impossible.

There is always CNN.

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

MOST NOTEWORTHY: Hershey Foods, Cognos, Resmed and Artes Medical were today's noteworthy downgrades:

• Hershey (NYSE: HSY) was downgraded to Underperform from Peer Perform at Bear Stearns. Bear believes the new CEO will be under intense pressure to improve operating performance, which will likely lead to higher R&D and marketing spending.
  
• Cognos (NASDAQ: COGN) was downgraded to Equal Weight from Overweight at Morgan Stanley following the acquisition by IBM (NYSE: IBM).
  
• ABN Amro lowered its rating on Resmed (NYSE: RMD) to Hold from Buy on valuation following the recent rally.
  
• Cowen downgraded Artes Medical (NASDAQ: ARTE) to Neutral from Buy following the company's disappointing Q3 report.

OTHER DOWNGRADES:

• Merrill downgraded Target (NYSE: TGT) to Neutral from Buy.
  
• Goldman downgraded Gatehouse Media (NYSE: GHS) and NewStar Financial (NASDAQ: NEWS) to Neutral from Buy.
  
• Bernstein downgraded Rio Tinto (NYSE: RTP) to Market Perform from Outperform.

MOST NOTEWORTHY: Select newspaper stocks and Dolan Media were today's noteworthy initiations:

• Banc of America initiated six stocks in the newspaper sector with Neutral ratings: Gannett (NYSE: GCI) was started with a $51.50 target, citing a lack of clarity into the company's acquisition strategy; New York Times (NYSE: NYT) was started with a $21 target, reflecting a lack of clarity into the company's acquisition strategy; E.W. Scripps (NYSE: SSP) was started with a $43 target, as the firm feels the company's Interactive division is a "big question mark" that could drag down company growth; McClatchy Co (NYSE: MNI) was started with a $26 target, as the firm is positive longer-term, but sees downside risk to 2007 consensus estimates; Lee Enterprises (NYSE: LEE) was initiated with a $19.50 target; Gatehouse Media (NYSE: GHS) was started with a $12.50 target.
  
• Dolan Media (NYSE: DM) was initiated with an Outperform rating and $24 target at Piper Jaffray. Piper believes DM's Q3 guidance is conservative given the default rates in July and August and notes the company processes defaults in two of the three highest default rate states. Dolan Media was also started with a Buy rating and $26 target at Merrill Lynch and with a Buy rating and $28 target at Craig-Hallum.

OTHER INITIATIONS:

• Think Equity assumed coverage of Intel Corporation (NASDAQ: INTC) and Micron Technology (NYSE: MU) with an Accumulate rating and $26 target and a Buy rating and $18 target, respectively.
• Citigroup started shares of Royal Caribbean Cruises (NYSE: RCL) and Carnival Corp (NYSE: CCL) with Hold ratings.
• SuperValu Inc (NYSE: SVU) was started with a Hold rating and $47 target at Citigroup.
• Rodman & Renshaw initiated shares of Omrix Biopharmaceuticals (NYSE: OMRI) with a Market Outperform rating.

I guess that it's only fitting that in a day where GateHouse Media shares debut in a successful IPO, that we also hear that The Boston Globe might be sold.

GateHouse Media, Inc. (NYSE:GHS), a local newspaper and online publisher, rose 20% in its market debut today before closing up 17.61%, or $3.17, from its increased pricing of $18 a share. More on GHS IPO here.

Today, we also learned of preliminary plans by no other than former General Electric Co. (NYSE:GE) CEO, Jack Welch and advertising exec Jack Connor to buy The Boston Globe from The New York Times Co. (NYSE:NYT).

Investment bank JPMorgan Chase & Co. (NYSE:JPM) helps the two investors with the potential deal. According to some involved in the discussion, JPMorgan has valued the Globe at $550 million to $600 million, well below the $1.1 billion The Times paid for it in 1993. This isn't that surprising since The Globe financial results haven't been stellar to say the least.

Welch and Connor are both Boston residents, which fits the recent trend of returning newspapers to local hands. However, The Times has repeatedly said the The Globe isn't for sale.

[Photo Chris Kirkman]