[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.