Last week, I mused about the repeated speculation that Pioneer Press owner Dean Singleton’s Media News Group might acquire the sinking Star Tribune and make us a one-newspaper town. Ex-Strib editor Tim McGuire, former head of the American Society of Newspaper Editors and now an Arizona State journalism professor, added this coda on his blog:
NOTHING I hear on the newspaper grapevine indicates to me that Singleton has the borrowing wherewithal to pull off such a deal. The grapevine may be withered and sour, but such a move would stun me.
McGuire was apparently on to something. Yesterday, news broke that the Moody’s had downgraded Media News’ debt to the lowest possible rating short of default.
That puts it one step above the Strib, which has defaulted on payments to its lenders. The Minneapolis paper’s owner now threatens bankruptcy next month.
I know I stuck an alarmist headline on this thing, but a couple of things to understand before we go too crazy. First, default is not bankruptcy — not right away, anyway. Second, as a company spokesperson told Editor & Publisher’s Mark Fitzgerald:
“MediaNews Group is in compliance with all debt covenants, as has always been the case, and expects to do whatever is needed to stay in compliance during these difficult times.”
Media News argues that its biggest lender is not a bank but its partner, Hearst Corp., a fellow (private) media company. The last time Media News faced default, it simply sold Hearst some Connecticut papers, reduced its debt, and remained in compliance with its loan agreements.
Could St. Paul be conveyed to Hearst if the financial dance is repeated? After all, the PiPress is reputed to be one of Media News’ better-performing.
Anything’s possible, but one argument against is that Hearst had other Connecticut papers, but none in Minnesota.
I’ve mused upon a dark-horse scenario where Hearst — a much bigger and more diversified media conglomerate — gets the PiPress and somehow combines it with the Strib. But I’ll be the first to admit I’m only laying down a marker in case this long-odds bet comes in.
I don’t know Hearst’s financial health, or its willingness to take on more of Media News’ problems. The companies appear joined, but in a hellacious ad climate like this, their interests might diverge. I also don’t know how much of Media News’ debt is held by non-Hearst interests who might be less amenable to a deal.
And of course, Media News can always “do whatever is needed” and cut its way to loan compliance. As I’ve often noted, its no-layoff agreement with the PiPress’ newsroom union ends Dec. 31. For locals, that’s the scariest prospect short of bankruptcy.