"The new owners — for now, the first-lien creditors who will want to quickly sell their stake — wind up ... "

Hey David, let's make a deal: I'll keep rounding up candidates for the Timberwolves coaching job while you identify suspects who will be taking the Strib off the hands of those first-lien creditors. Who might be wading in?

In my view, the EBITDA multiple is reasonable, perhaps even generous -- especially in light of the fact that the Strib has been totally incapable of identifying new sources of revenue, an amazing feat given the popularity of its web site and an evident brain cramp when it comes to monetizing that usage. (Hint: Micropayments for full story views; higher payments for formatted story views; reasonable reprint fees and services. See eBay, Amazon business models.)

Other reasons for the low multiple:

-- Uncertainty EVERYWHERE. Fabulously underfunded pension plan, with a totally schizophrenic equity market and an equally distorted fixed income market, making any sort of discount rate projections relative to future liabilities essentially a roll of the dice.

-- Still no clear visibility on an economic recovery, which leads to stronger consumer spending, higher asset valuations (i.e. classifieds) and higher advertising revenue. Witness BBY stock, at $34 a share, 11 times forward earnings, less than a "1" PEG ratio -- cheap, cheap, but who's willing to risk their investment reputation on a $2,200 flat screen purchase?

-- Not so great cash flow (duh). An eight percent mortgage, or put another way, 300 basis points over LIBOR with a five percent LIBOR floor. So you're telling me that they're already stratospherically above current market rates? One-year LIBOR is at 1.73 percent. Add 3 percentage points, and that results in a 4.73 percent interest rate if you were to use a REAL LIBOR-calibrated rate. Looking at six-month LIBOR rates, it's even worse. Six-month LIBOR, which matches the twice-yearly payments of many corporate bonds, is at 1.16 percent, suggesting a rate of 4.16 percent. So we're setting a "floor" on LIBOR that is (depending on the selected term -- one year or six-month) that is fully either 3.84 percentage points over the current six-month rate, or 3.27 percentage points over the one-year rate. Why even use LIBOR? In current market conditions, it's a meaningless calculation. Why not just write into the agreement: "The Star Tribune Company shall pay current debt-holders at a rate defined as 'through the nose.'"

Given the risk, maybe that's fair -- but spare us the LIBOR crap. That just gives the bondholders much, much higher upside, and absolutely no benefit to the business for better performance. Interest rates soar, the bondholders get higher payments. So even if the paper starts doing really well, in a higher inflationary environment, they're still penalized.

-- Other negatives: No resolution whatsoever on how to protect the paper's intellectual property (editorial content) from the aggregators, the mere existence of the truck drivers. . .outside-the-newsroom, Avista-promulgated, suffocating editorial policies that squelch aggressive reporting and strong editorial positions (lessening a value proposition for readers).

So who wants to pay up for that kind of hairball?

Best solution: Liquidatation (but it's too late for that); start again with a greenfield operation: leased trucks (tons of capacity there -- and yes, give the new drivers a GPS to negotiate all those extremely complicated delivery routes the Teamsters were braying about); no unions (and this, from a former union negotiator); keep the staff people who really want to be journalists, and hire some people (remember the concept: "cub reporter"?) willing to cover night city council meetings in Lakeville and Andover -- taking on the suburban pubs -- then figure out how to package it and make money on it (that nice web site, perhaps?). Oh, and also get rid of any editor who consistently comes to planning meetings without anything resembling a decent story idea; start covering your own bankruptcy story and doing the kind of investigative work, advocated -- admirably, I might say, by Nancy Barnes -- that bring people back to read the newspaper every day. Oh, and make your columnists actually express an opinion, especially on state and local politics, rather than write glorified feature stories and personality profiles. But that brings us back to our friends at Avista. Sell the presses; firesale the building and parking lot and rent some of the 25 percent or so vacant space in downtown Minneapolis. In other words, pull every available dollar out of the operation and reset the break-even point for the enterprise. In my view, bankruptcy may not, in the final analysis, solve that particular problem. I really, really hope I'm wrong.

All crazed ravings, and not the least bit realistic, but in my humble opinion that's why someone is only willing to value the business at five times EBITDA. By the way, I'm guessing that there's not much "D" or "A" -- depreciation or amortization -- both non-cash items -- left; so this is pretty much a hard cash on hard cash valuation, which is actually a positive and may have a positive impact on the low multiple.

Tony Carideo, CFA
Former reporter

Tony,

"Bring people back to read the newspaper every day."

More people seem to be reading the StarTribune than ever before between the print and digital editions. It is not a matter of content. It is a monetary issue.

My mother used to keep every StarTribune from big news events. I analyzed the edition announcing Nixon's resignation. With the exception of the number of columnists there were more local stories from this weekends newspaper than there was in the Nixon edition. I honestly do not see a huge amount of difference.

One cannot ignore what is happening to all media. I would be very interested in seeing what are the detailed financials and projections for MINNPOST. I do know the owners of this website have admitted that they are not going to reach profitability as soon as projected. Does this mean that MINNPOST is doomed?

One cannot look at the newspaper industry without acknowledging the severe financial hardship of all traditional media. My sister was laid off at a local clear channel radio station because of the same debt issues facing Avista. They are losing lots of money, and she expects them to be filing bankruptcy in the not too distant future in light of what is happening with the automobile industry. I have friends that work at local television news channels who do not think there will be tv news shows in the forseeable future do to advancements in technology. Why stay up late to get the Twins score when you can get it off your computer.

Broadcast and radio depend on automobile and real estate advertising. With real estate migrating to the internet, and the auto industry in free fall one must acknowledge that ALL media has an uncertain future. Even Huffington Post, YouTube and Facebook are losing money (with no change in sight) and they serve millions!

As a society I hope the StarTribune, PioneerPress, MinnPost, public radio and television etc. survive. We need as much information as possible not less for the sake of our democracy.

You have to admit their website is dominating the country (from Editor & Publisher). Pretty impressive numbers. They led in April too:

EXCLUSIVE: Average Time Spent on Top 30 Newspaper Web Sites Declines -- More Than Half Fall

By Jennifer Saba

Published: June 22, 2009 10:50 AM ET

NEW YORK The amount of time people spent at the top 30 newspaper Web sites is stuck in neutral if not reverse: More than half saw significant falloff in May.

The list is for May Nielsen Online data for the top 30 newspapers' Web sites ranked by unique users. Nielsen (owned by E&P's parent company) defines the average time spent per person at a site during the month.

Seventeen of the top 30 decline in time spent.

There were a few standouts on the list. The average time spent at The Star Tribune in Minneapolis jumped to more than 47 minutes in May 2009, compared with 27 minutes in May 2008. In April, the site claimed the most time spent out of the top 30 Web sites.

The San Francisco Chronicle and SFGate.com almost doubled the amount of time spent on site in May 2008 to 21 minutes from 12 minutes in the same month a year ago.

There are many reasons why the average time spent per person can vary including news events or even the number of visitors. A big spike in uniques -- more people attracted to the site -- could account for a lower time-spent average.