Nonprofit, nonpartisan journalism. Supported by readers.

Donate
Topics

Star Tribune’s post-bankruptcy operating loss: $1.8 million

The paper is losing about $300,000 a week since filing for Chapter 11 — and that doesn’t include $2.2 million in bankruptcy costs.

The Star Tribune has posted a $1.8 million operating loss in its first six weeks in bankruptcy, according to court documents filed Friday.

The paper grossed $24.2 million from Jan. 15 to March 1, and spent $26 million. Management also racked up a hefty $2.2 million in reorganization costs, which are not reflected in the operating loss.

Until now, Strib has managed a profit even as its business deteriorated and it stopped paying off $480 million in debt. In 2008, for example, the operating profit was $31 million.

The danger for a bankrupt business is that no one will lend you money to cover losses, leaving only cutting to keep the doors open.

Article continues after advertisement

However, the Strib had squirreled away $25 million before its mid-January filing to keep operating, and the new documents shed some light on the bankruptcy move’s timing. Despite the $4 million lost to operations and reorganization, the paper’s cash position actually soared to $34 million as Christmastime advertising payments came in.

Even for solvent businesses, the first quarter is typically the worst, so it’s unwise to generalize about a full year based on these figures. The Strib grossed about $16 million a month in January and February; it has projected a monthly average of $17 million for the year.

If historically better quarters outpace economic deterioration and the advertising shift from print, the ’09 projection is makeable.

Still, how does a paper that lost $1.4 million in February hope not just to be profitable, but earn enough to pay back whatever post-bankruptcy debt is left after Christmastime cashflows abate?

Management’s answer is clearly labor cuts: the newest figures do not reflect $20 million management is steadily extracting from union workers. That amounts to $1.67 million a month. (Union officials say the actual cuts may be higher.)

Another $10 million has come from the nonunion workforce; it’s unclear how much of that is reflected in the January-February numbers.

On Wednesday, it was revealed that 10 non-newsroom executives received a collective $2.6 million in 2008, including $530,000 for its chief financial officer. Management has not quantified how much, if anything, it will save on that line item.