GateHouse Media shares rise 20 pct in debut

NEW YORK, Oct 25 (Reuters) - Shares of newspaper publisher GateHouse Media Inc. (GHS.N: Quote, Profile, Research) rose 20 percent in their market debut on Wednesday, a day after pricing at the top of a forecast range.

Shares of the company opened up at $21.60 before easing to $20.82 in morning trading on the Nasdaq.

The company raised $248 million Tuesday with a 13.8 million share offering, which was increased from an initial 11.5 million shares, that priced at the top of a $16 to $18 forecast range.

The pricing gave the company an initial market capitalization of about $621 million.

The company plans to use net proceeds from the offering to repay debt.

The company, majority owned by private-equity fund Fortress Investment Group LLC, paid more than $21 million in debt payments, but had only $13.6 million in operating income, this year, according to pro-forma adjusted figures in the company's SEC filing.

The role of Fortress Investment, which has a good reputation with many investors, may have made the difference in the IPO, said Francis Gaskins, president of IPO Desktop, an independent research firm based in Los Angeles.

"This one has an air of real mystique to it because of Fortress," he said. "The financials look terrible, but they are saying 'we put in a top five management team and you can trust us.'"

GateHouse's IPO comes amid a difficult period for newspaper companies facing competition for readers from the Internet and advertising woes as a result of a slowdown in the slow housing market, troubles in the auto industry and other economic factors.