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Star Tribune workers: Paper ‘more ours’ than owner’s

A half hour after Star Tribune management filed for Chapter 11 bankruptcy, at least one labor leader was defiant.

With the paper publicly declaring a $26 million operating profit in 2008, newsroom Guild co-chair David Chanen says, “We’ve seen those numbers since they renegotiated their contract with us earlier this year. Since Avista bought us, they’ve run us into the ground, gotten us into too much debt. It’s not any of the union contracts that forced the Star Tribune to file for bankruptcy.”

Soon, he’ll get to tell it to the judge — a bankruptcy judge in the Southern Circuit of New York, when Strib owners Avista Capital Partners filed Thursday night. That unnamed arbiter will, in all likelihood, decide how big the area’s biggest newsroom will remain. While not welcoming the predicament, Chanen seemed almost relieved by it.

The delicate dance of bankruptcy goes something like this: Management makes an offer, knowing it will be the one they’ll take to a judge. Labor makes an counteroffer, knowing it will be the one they take to a judge. “They’ll have to justify the numbers they put on the table,” Chanen says of Avista. “We assume a judge won’t consider [their last offer] as a reasonable offer.”

No one really knows, but labor’s case is this: We’ve lost 100 jobs in a couple of years. We took $2.4 million in cuts in July, 10 percent of the newsroom’s budget. When things got worse this fall, we offered to take another $2 million hit, extending a 18-month wage freeze to three years, instituting mandatory unpaid furloughs (the kind KARE11’s owners just imposed), and freezing pension contributions for two years. On top of that, ownership just saved $2 million by buying out 25 of us.

Management, which did not return calls for comment, will note that operating profit deteriorated dramatically from $115 million in 2004 2006, the year it bought the paper. (The profit margin that year was likely over 20 percent, possibly 30.) The figure does not include taxes, or interest payments, which ownership stopped making this fall.

“They’ve told us the nonpayments they were making on the interest was because they wanted a cash reserve,” Chanen says. “They’re holding up a ton of cash, a significant dollar amount. In a way, it’s a good thing; they need to make payroll.”

Chanen acknowledges management’s cost-cutting demands were based on “their projections into the future with declining revenues and the cash flow they had. They never said they were not making money, but with a heavy debt load, they couldn’t keep operating as they were.”

Now it’s up to a judge to decide just how big a haircut labor and creditors take. (Avista has already written off all of its investment; so has publisher Chris Harte who, it was revealed in the filing, owns about 4 percent of the company.)

Chanen’s co-chair, Graydon Royce, knows who he’s rooting for.

“All I can say is that we take seriously the future of the newspaper and our continuing role in covering events that define Minnesota. A lot of us have been here for decades; this is our community. Avista has been here for two years — I hesitate to say here. We really feel it is more ours than theirs. We’re committed to keeping on.”

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Comments (3)

  1. Submitted by Richard Parker on 01/15/2009 - 11:30 pm.

    Will the 23 folks who left a week ago get their buyout checks on schedule, or could those be held up now?

  2. Submitted by Thomas Swift on 01/16/2009 - 10:17 am.

    “Paper ‘more ours’ than owner’s”

    Reason #245 not to have anyone *ever* do your negotiating for you. You never know when your mouthpiece is going to say something while blind drunk.

  3. Submitted by Comsnr. Bill Weir on 01/19/2009 - 07:47 pm.

    Good for the Guild co-chairs, Graydon Royce and David Chanen!!!

    We subscribers sure hope they can make their case to the judge and get our STrib out from under the destructive influence of Avista Capital Partners.

    How did Avista manage to run up such huge debts in so short a time? (See the list of thirty largest creditors included in the bankruptcy filing.) Was it ethically bad business practice? Or dumb executive decisions?

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