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Deutsche Bank, SunTrust Land Lee-Pulitzer Financing Package

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Lee Enterprises has tapped two new lead banks to quarterback the financing of its $1.46 billion acquisition of Pulitzer. Deutsche Bank and SunTrust Bank have landed lead roles after the Davenport, Iowa-based Lee interviewed several banks for the top spots.

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Lee Enterprises has tapped two new lead banks to quarterback the financing of its $1.46 billion acquisition of Pulitzer. Deutsche Bank and SunTrust Bank have landed lead roles after the Davenport, Iowa-based Lee interviewed several banks for the top spots. Deutsche is a first time lender to the company; SunTrust was a participant in an existing deal. "We liked their enthusiasm about the transaction, [and] their level of commitment," Carl Schmidt, Lee's v.p., cfo and treasurer, said of the two banks.

Bank of America led the credit backing Lee's purchase of Howard Publications in 2002, but the bank is not involved from the start this time. "Bank of America did a very good job as our lead bank with the Howard deal," Schmidt said, but he would not comment on the bank's involvement in the current financing. A B of A spokeswoman also declined to comment.

The credit for the Pulitzer deal will consist of an $800 million, seven-year term loan and a $450 million, seven-year revolver, both priced at LIBOR plus 1 1/2%. It also includes a $300 million, eight-year term loan, to be sold to investors at LIBOR plus 1 3/4%. "We told Lee that all of the financing markets were attractive and open to them," said John Giegerich, managing director and head of the media and communications group at SunTrust. "Lee could access traditional bank markets, access institutional term markets, access private placement markets and access public bond markets."

Although Deutsche Bank had no previous relationship with Lee, Managing Director Dan Toscano said the bank did not hesitate in going after a lead role. "This company has a strong balance sheet to work from, to put acquisition debt on. It was an easy one." One New York-based buysider that covers newspapers said there is not a big concern at the bank level as these companies usually throw off tremendous cash flow. Giegerich noted Pulitzer's market strength. "[What] we like about Pulitzer is that they have grown circulation, where some other newspapers have had declining circulations," he said. "Small-to-midsize markets will face less pressure than larger market newspapers."

One player in the acquisition that will not be leading the bank deal is Goldman Sachs, which was hired by Pulitzer last year to look at its options. Schmidt said investment banker Chase Stevenson of Goldman contacted Lee regarding the deal. Lee then hired Lazard to advise on the acquisition. Goldman never pitched to lead the staple financing for the deal and Schmidt said Lee would not have tapped the firm anyway. "From our perspective, there were some inherent conflicts," he said, bucking a trend where acquirers use the adviser to the selling company for financing. "That would not have been an option we considered." A Goldman spokeswoman declined comment.

With the acquisition of Pulitzer­which operates the St. Louis Post-Dispatch­the new company will have combined daily circulation of approximately 1.7 million and 2 million on Sunday. Alan Silverglat, Pulitzer's senior v.p. of finance and cfo, said the company was "considering its strategic alternatives to maximize shareholder value," when it decided to sell.

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