Strib: Bankruptcy filing is ‘on the table’

[Updated with info from publisher Chris Harte’s staff memo, which is reprinted in full here.]

According to the Star Tribune’s website this morning, the paper says it has stopped making quarterly payments on its debt, and a bankruptcy filing is one option as it negotiates with creditors.

The paper reports that it skipped a $9 million payment to senior creditors on its $432 million in debt. The payment was due yesterday. In June, the Strib skipped an interest payment to junior creditors, which at the time publisher Chris Harte said senior creditors okayed as part of a financial restructuring that has not come to fruition.

According to the story, “All options, including a bankruptcy filing, are on the table,” but Harte says “nothing is imminent.”

It is, however, the first time Harte has not knocked down the bankruptcy option. In May, the New York Post reported the paper was “on the brink of bankruptcy,” but that brink has carried at least through the summer and early fall.

Since June, Strib management received $2.5 million in concessions from its newsroom, and earlier this month, laid off several pressmen, saving a reported $2 million to $3 million. The paper has sought an additional $9 million to $10 million from a consortium of blue-collar unions that have so far refused to renegotiate existing contracts.

Harte told reporter Matt McKinney the paper is still profitable — though apparently not enough to pay its mortgage in a cratering economy.

In a memo this morning to staff, Harte wrote that restructuring negotiations have “been further complicated by the tightening of the credit markets.” He added that “the deterioration of the overall economy has continued to negatively impact our revenue.”

In June, Strib co-owners Avista Capital Partners said they’d written down $75 million of their initial $100 million cash investment. Even that remaining equity has likely been gone for some time; the paper almost certaintly wouldn’t sell for the $432 million still owed. That leaves speculation that Harte is basically running the operation for the lenders.

We’ll update this story throughout the day.

You can also learn about all our free newsletter options.

Comments (3)

  1. Submitted by edward allen on 10/01/2008 - 03:28 pm.

    The next time you talk to Harte, pin him down on what he means by “profitable.” How can a company bringing in revenues but not being able to pay its debts be profitable? I am sure it is bringining in revenue, but my guess of what has happened is that is insufficient to meet its expenses. You are all in the media here. Don’t play the same obfuscation games you regularly pillory others for playing.

  2. Submitted by David Brauer on 10/01/2008 - 06:17 pm.

    Edward –

    The fault is mine; Harte regularly talks of an “operating profit” – that means the operations produce positive cash flow BEFORE things like debt payments are figured in. (The common business jargon is EBITDA – earnings before interest, taxation, depreciation and amortization.)

    It’s an important distinction because a business that’s operating profitably doesn’t need to go back to the lenders it’s not paying for MORE cash.

    To be sure, not paying your debt has severe consequences: the bill gets bigger and eventually you go bankrupt. So this is not a small deal for the Strib.

    But the operating profit isn’t meaningless either, at this point. Losing that seems the next (final?) step, but we’ll have to see how expense cutting and restructuring goes.

  3. Submitted by michael loehrer on 11/12/2008 - 03:25 pm.

    The Star Tribune shouldn’t get it’s shorts in a bind about bankruptcy. By the time the election of 2012 comes around they’ll be joined by the LA LA Times New York Times, Atlanta Constitution,
    Des Moines Register and every other liberal

Leave a Reply