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One thing’s certain to newspaper publisher Walter Hussman Jr.: “It pays to talk to reporters!”
Wehco Media Inc. of Little Rock, the company Hussman leads as chairman, used a tip he gleaned being interviewed by the Wall Street Journal to avert job consequences for about a tenth of his newspaper group employees.
Facing an unprecedented loss of half of its advertising revenue in the coronavirus recession, Wehco learned it was wrong in assuming it was too big to qualify for federal relief loans. That led to the company lassoing federal Paycheck Protection Program loans through Simmons Bank to stave off voluntary furloughs, salary cuts and reductions in hours, not to mention possible layoffs on the horizon.
The media group, which owns more than a dozen newspapers, including the flagship Arkansas Democrat-Gazette in Little Rock, had sought voluntary furloughs in mid-April and had enticed more than 90, “close to 10%,” Hussman said.
Now all those job consequences are put off, with Wehco hoping to benefit from loan forgiveness outlined in the relief legislation for companies who spend the proceeds on payroll and other designated purposes.
“When the [loan] program was first announced, we inquired with our industry trade groups, and they said we couldn’t participate if we had more than 500 employees,” Hussman told Arkansas Business in a Tuesday morning email. “About a week or so later I had a call from a Wall Street Journal reporter doing a story on the newspaper business, and I told her we couldn’t qualify…”
She replied that he was mistaken, and that the employee limit for newspaper companies was not 500 but 1,000.
“Either something had changed or she knew more than the industry trade,” Hussman said, next applying his own parentheses: “(It pays to talk to reporters!)”
Hussman and President and CEO Nat W. Lea IV announced the loan arrangement Monday in a letter to all newspaper employees, saying the furloughs and possible “necessary reduction in force” have been superseded by the loans, which cover eight weeks of payroll.
The company, which also has substantial cable TV operations, thanked newspaper employees who had volunteered for furloughs and work cuts. “We asked for these volunteers due to hundreds of thousands of dollars of advertising canceled in the month of March,” the letter said, declaring April was even worse, with all Wehco newspapers combined reporting a 50% drop in ad revenue, “something we have never experienced.”
Since advertising still represents half the newspapers’ cash flow, Hussman and Lea said the company had been drawing up “plans for more salary reductions and a necessary reduction in force.”
All that changed with the Small Business Administration loans, Hussman told Arkansas Business. “Early on, George Makris at Simmons had reached out to see if they could help us with one of these loans. I told him I didn’t think we could qualify. Monday a week ago, realizing we probably could qualify, we contacted several banks we do business with. J.P. Morgan told us they didn’t make any loans for companies with over 500 employees. Regions Bank told us they had all the loan volume they could handle and it was probably too late to apply. I got back in touch with George at Simmons. A week later they had submitted our request, it had been approved, and we had the funding. We could not have been more impressed with Simmons Bank and the people there.”
The loan program offers “forgiveness or a grant” if used to maintain payroll, Hussman and Lea said in the letter. “Our SBA loans have been approved and funded covering a full eight weeks of payroll.”
The company rescinded the furloughs and pay and hour cuts for the duration of the loan. “This will give us eight weeks for stores to reopen and advertising to return to more normal levels,” the letter said.
The loans are not a panacea, Hussman and Lea warned.
“There is still a lot of uncertainty, so we will have to see how much progress can be made by early July. Another uncertainty is in borrowing with a federal program, something we have never done. In the event that we have to repay the loan and it is not forgiven, we will incur a significant loss for those two months.”
But Hussman and Lea stressed the company’s values “in placing the interests of employees ahead of shareholders, and we are willing to take that risk in order to maintain the wages, hours, and salaries of employees.”
The loans come at a particularly gloomy time for daily general-interest newspapers, which have been bleeding revenue and jobs across the country for years and have been crippled by the COVID-19 pandemic, which shut down many local businesses and restaurants, and curtailed advertising expenditures by even more.