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Star Tribune announces bankruptcy exit; Harte out

The Strib's business section broke the news just before midnight: the paper plans to exit bankruptcy this fall, carrying $100 million in debt, but not current publisher Chris Harte, who plans to leave when Chapter 11 is done.

Though we brought you the $100 million plan two weeks ago, and new financiers could hardly be expected to keep a guy with Harte's record in place, last night's announcement is a milestone on many levels. If the creditors sign off — and they should, given that Harte has worked closely with them — the Strib would be the first paper that's made it out of bankruptcy in this current wave.

While there are tons of questions — "Who's in charge?" chief among them — there was a risk the Strib wouldn't make it out and be liquidated, so it will be nice to see the paper on firmer footings, even amid an environment that remains shaky as hell.

While I retain some skepticism the Strib can service even $100 million in debt (it hasn't paid a penny since fall, and the environment has only gotten worse since then), I can only hope the court will vet the exit plan and judge it workable. The employees who've taken it on the chin deserve at least that.

As for Harte, his tenure will be remembered for its fecklessness, from his ill-timed personal investment to his ill-considered Par Ridder hire to sanding off the edges of his editorial board.

Insiders say he's a guy who sincerely cares about journalism, and to some extent was the victim of circumstances affecting everyone. But on a fundamental level, he destroyed a lot of value for himself, his pals at Avista (whom he convinced to do the deal), his employees and this community.

That said, the University of Texas MBA apparently can claim credit for navigating the paper out of Chapter 11, and may even be remembered fondly if the new owners amp up the ruthlessness.

I'll have more thoughts this morning as I chew through the re-org plan. For now, here's Harte's memo to his staff:

Bankruptcy Update: A Major Milestone

By Chris Harte, Publisher

I am pleased to report that we have reached a major milestone in our financial restructuring. Today, we have filed with the bankruptcy court our proposed Plan of Reorganization and a related document called the Disclosure Statement. The Plan sets out how our creditors’ claims will be resolved and provides the roadmap for our emergence from Chapter 11 later this year.

The filing of the Plan follows months of negotiations with our first lien lenders, our second lien lenders, the unsecured creditors’ committee, and other parties.

Generally speaking, the Plan provides for the first lien lenders to receive new common stock and new secured term notes for their claims. Holders of unsecured claims will receive either a small cash distribution or new common stock and warrants for stock to be issued in the future if the company achieves certain financial targets.

Previously issued equity will be cancelled and will not result in any recovery to the owners. The Plan also provides for the reorganized company to emerge from bankruptcy as a privately held enterprise.

The draft Disclosure Statement filed today includes information about the proposed Plan of Reorganization that is intended to assist eligible creditors in determining whether or not to vote to accept the Plan.

Approval of the Disclosure Statement and related voting solicitation procedures, which we will seek at a bankruptcy court hearing scheduled for July 29, 2009, will permit us to solicit creditor acceptances for the proposed Plan and seek confirmation (approval) of the proposed Plan by the court. If the Plan is confirmed by the court, we can emerge from bankruptcy.

This process will take at least a few months. If all goes according to schedule, we expect to have our confirmation hearing in September and to emerge from bankruptcy a few weeks later - sometime in autumn 2009.

In other words, the end is in sight. Meanwhile, we continue to make good progress in positioning the company for future success. Our agreements with the Fleet, Mailers, Pressmen, Platemakers, Typographers and Guild are major achievements. We hope to reach similar agreements with the remaining unions shortly.

As I have written previously, we are fully confident that the Star Tribune Company will emerge from bankruptcy in vastly better shape than when it entered, much more ready for the intense competition in a rapidly evolving news and information industry. We will continue to provide our readers an outstanding news and information package, and our advertisers with customers they want to reach, and we will do it in print, online, on mobile devices, and in other new media as they develop.

Thank you for all your hard work, dedication and sacrifice during these many months of uncertainty, hardship and belt tightening. Your continued commitment to serving our customers, advertisers and community are the key to our success. Thank you for all you do every day.

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Comments (2)

Geez I hope Harte is able to sell his house so he can afford rent somewhere and not end up homeless.

hello all
it think the owners of the trib should look at the success of the fox cable news network, talk radio. instead of being a mouth peice for the government, just re-issuing the information given to them by politicians, they should remember why the founding fathers put the freedom of the press in the consitution. THE ROLE OF THE PRESS IS TO BE THE WATCHDOG OF THE GOVERNMENT. IT IS THEIR JOB TO ENSURE THE GOVENMENT IS SERVING THE PEOPLE.

if they return to this important function they would sell more papers.