Here’s publisher Chris Harte’s memo to the Star Tribune staff this morning explaining why ownership failed to make a $9 million payment on its $432 million in debt. It’s the first time the paper’s senior lenders have not been paid.
(MinnPost’s story on the default is here; the Strib’s is here.)
By Chris Harte, Publisher
We have decided not to make our quarterly interest payments, due late yesterday afternoon, to both our first and second-lien lenders.
As you may recall, we did not pay our second-lien lenders last quarter, which put us officially in payment default on June 30.
We continue to have active discussions with our lenders about our financial situation and are working with them, with the help of the Blackstone Group, on restructuring the company’s debt.
The decision not to make the quarterly payments is driven by our need to conserve cash resources and maximize our liquidity while we work through this restructuring process.
The restructuring process is complex and has been further complicated by the tightening of the credit markets. At the same time, the deterioration of the overall economy has continued to negatively impact our revenue.
You are well aware of all the many steps we have been taking to try to reduce our expenses and get them in line with declining revenue. Our difficult financial challenge is to get costs in line with revenue so we have sufficient cash flow both to pay our debt and grow our franchise.
In addition to cost-saving and revenue-generating initiatives, the restructuring of our debt will be a major step in getting us back on track.
I know you are wondering how much longer this will take. I wish I had a prediction, but I don’t. What I can tell you with confidence is that we are working hard on this every day, and all parties involved are eager for a resolution.
As always, I ask that you stay focused on the work you can directly influence and not be distracted by the restructuring issues. We have a fundamentally sound franchise, and we need to keep it healthy and growing. Focus on our customers. They depend on us, and we depend on them. As long as we honor that trust, we have a promising future ahead.
In the next few days, I will be writing you again with an update on the overall state of the company. We are making healthy progress on many fronts, but our strong initiatives and the hard work of our employees often get masked by our persistent financial challenges.
What irony — or coincidence, as we copy editors sometimes would edit that overused term. The ad floating in this text on my screen is for the Silha lecture at the Cowles Auditorium. When I started at the Tribune, Otto Silha was publisher and John Cowles Sr. was the patriarch of the family that owned the thriving Star and Tribune, two separate newspapers. Those were the good old days!