NEW YORK (Reuters) - The Minneapolis Star Tribune has filed for bankruptcy, becoming the latest newspaper to financially flame out under a heavy debt load and a punishing decline in advertising revenue.
The 15th-largest U.S. daily based on circulation, which McClatchy Co sold to private equity firm Avista Capital Partners for $530 million less than two years ago, filed for Chapter 11 bankruptcy protection after missing payments to lenders, it said on Thursday.
“With the significant deterioration in our revenue in 2008 and the challenging outlook for our industry for 2009, we simply could not wait any longer to take this step,” Star Tribune Publisher and Chairman Chris Harte said in a statement.
The newspaper has said it will continue to publish.
“Our plan is to use the court-supervised process to reduce our costs, strengthen our balance sheet and create a financially viable business,” Harte said.
The Star Tribune’s bankruptcy filing comes about a month after Tribune Co, publisher of two of the largest papers in the United States — the Los Angeles Times and Chicago Tribune — filed for bankruptcy.
Tribune Co, with $13 billion in debt, is a far larger filing, but the bankruptcy of the Minneapolis paper is a sign that publishers large and small are facing an uncertain future as they try to pay off debt with ever-diminishing amounts of cash.
Lee Enterprises Inc, publisher of the St. Louis Post-Dispatch, faces a Friday deadline to work out its debt problems with its lenders. The company’s auditor in December voiced doubts about whether it could continue as a going concern, despite its profitable operations.
Lee also is seeking a reverse stock split to buck up its share price, which is below the minimum listing requirements for the New York Stock Exchange, the Post-Dispatch reported on Friday.
EW Scripps Co could shut the Rocky Mountain News in Denver if it does not find a buyer soon, and Hearst Corp has said it might close the Seattle Post-Intelligencer if it does not find a buyer in the next two months.
The Star Tribune said it has sufficient cash to continue its operations and does not anticipate needing debtor-in-possession financing.
In its filing, the newspaper listed assets of $493.2 million and liabilities of $661.1 million. It hopes to use bankruptcy to restructure its debt and lower its labor costs.
The news came on the same day The Boston Globe, owned by the New York Times, said it would cut 12 percent of its newsroom staff, and a day after USA Today publisher Gannett Co Inc said it would force staff to take a one-week furlough.
Avista said it would buy the Star Tribune in December 2006, just as advertising woes worsened and more people left the paper behind, seeking free news on the Web.
At the time, OhSang Kwon, Avista’s chief dealmaker in charge of the Star Tribune purchase, and his partner James Finkelstein told Reuters they did not plan layoffs as part of the deal to take the newspaper private. They also said the most important aspects of the paper were its people and content.
Months later, the paper said it would offer buyouts, and later said it would lay off staff. Eventually, some unions representing employees at the paper did not agree to cutbacks. Shortly thereafter, the Star Tribune filed for bankruptcy.
While the Star Tribune is profitable, its 2008 earnings before interest, taxes and debt payments was $26 million, down 77 percent from 2004.
Additional reporting by Ajay Kamalakaran in Bangalore; Editing by David Holmes and Derek Caney