America’s 15th largest newspaper, The Minneapolis Star Tribune, files for bankruptcy
17 Jan 2009
The Minneapolis Star Tribune newspaper, the 15th largest in the US and the largest newspaper in Minnesota, has filed for bankruptcy, hurt by a heavy debt load and a huge decline in advertising revenue, aggravated by the steep economic slowdown.
With this filing, the paper joins the unrelated Tribune Co, publisher of the Chicago Tribune, Los Angeles Times and The Sun of Baltimore, in bankruptcy protection. Also, several metro dailies face closure if no buyer is found, including the Seattle Post-Intelligencer and the Rocky Mountain News in Denver. Final bids for the Rocky were due Friday. (See: Tribune files for bankruptcy protection)
The move was widely expected after the paper missed multiple payments to its lenders. The paper's management recently said that it would resort to such action if it didn't win a series of labour concessions.
"With the significant deterioration in our revenue in 2008 and the challenging outlook for our industry for 2009, we simply could not wait any longer to take this step," the paper's chairman Chris Harte said.
Last month, the chairman told employees the "survival of the company" was at stake and asked labor unions to agree to $20 million in cuts by mid-January. Talks broke off Jan. 8 without a deal. The unions represent more than half of the paper's nearly 1,400 employees.
Companies in bankruptcy protection can ask a judge for permission to reject union contracts, ultimately imposing terms if no deal is reached. Star Tribune spokesman Ben Taylor said Friday it was too soon to know whether the newspaper would seek to reject those contracts.
Star Tribune is the product of a merger in 1982 between the Minneapolis Star, an evening newspaper, and the Minneapolis Tribune, a morning newspaper founded in 1867 and published by the same company.
In 1998 The McClatchy Company purchased the publisher of the paper, Cowles Media Company, and sold off its other holdings, keeping the Star Tribune.
On December 26 McClatchy Co sold the paper to private equity firm Avista Capital for $530 million less than two years ago. The paper listed assets of $493 million and liabilities of $661 million.
In the last five years, the Star Tribune's weekday circulation dropped 15.2 per cent to 311,760, according to the most recent figures from the Audit Bureau of Circulations. Sunday circulation dropped 23.2 per cent in the past five years to 520,829.
In response to the filing, the guild representing the paper's newsroom employees issued a statement in which it criticized Avista for its management in the wake of a series of union concessions. The guild statement noted that since Avista's purchase, the union has lost about 100 jobs, or nearly 25 per cent of the news staff.
"It's unfortunate that a New York-based private equity company has put the Twin Cities largest source of news and information at risk," said Graydon Royce, co-chair of the Star Tribune unit of the guild.
Avista said in a statement that it is "disappointed" the Star Tribune needed to file for bankruptcy protection. The firm said it is hopeful the paper will emerge from a court restructuring "in a better position to succeed in a challenging and evolving industry."
The Star Tribune's Chapter 11 filing comes as papers across the country are struggling to survive amid steep declines in advertising revenue and huge debt obligations.
Many newspapers are in trouble because of their high debts and not just the state of their ongoing operations. Many took on loans when profits were higher and are now having trouble generating the cash they need to make those debt payments.