Strib Bankruptcy Watch: The Hits Keep Coming
It's been a tumultuous week at the Star Tribune, what with all the speculation that the paper of record is broke. Here's your roundup of the week that was.
A cheeky take by the Brits, with the genius headline Newspaper Killer Confesses.
At last, we have found a culprit who is slowly killing newspapers across the United States. Her real name is unknown, but her online identity is daphne3620 and she left the following comment on the Web site of the Minneapolis Star-Tribune:Now I feel like garbage I read the Star Trib online and don’t subscribe to the actual physical paper. Sorry .. guys! I would gladly pay to use the site here .. give it a thought. I am serious .. I will pay.
This comment was attached to an article posted to the Strib’s Web site on May 6 that revealed that the paper’s owner had to write down 75 percent of the $100 million it paid for its stake. Private equity firm Avista Capital Partners engineered a purchase of the paper from McClatchy Co, which was announced in 2006. Since then, the paper has hemorrhaged revenue, just like many other big-city dailies.
The write-down, taken at the end of 2007, reflects the estimated loss of value and is consistent with the falling stock prices of publicly held newspaper companies such as McClatchy and the New York Times. Avista’s public accountants required the private equity firm to write down or “mark to market” the estimated value of the Star Tribune.
The memo denied a recent report in the New York Post that the Star Tribune may file for bankruptcy.
“The Star Tribune currently has sufficient liquidity and is up to date on all its debt payment obligations,” said the memo, distributed by Avista.
And if this turns out to be wrong, daphne3620 and all her freeloading friends will have to pay a very big price indeed. (Me included.)
George White of the Daily Deal writes about a potentially revelatory press conference held by the Star Tribune's new cost cutters, the Blackstone Group:
At a Wednesday media conference, Jill Greenthal, a senior advisor at Blackstone, said that the current environment is "as turbulent a time in media as we've ever seen, particularly for old-line companies. I think we're only at the tip of the iceberg in terms of what it means for the industry."
With the Internet gutting the high-margin classified business that the industry has long relied on, newspapers are hunting for new business models that will allow them to weather the storm. The turmoil has attracted investors like Avista and Sam Zell.
"Buying a newspaper is not for the faint of heart. It's either a really great time to buy a newspaper," Greenthal said, "or a really bad time to buy a newspaper. Time will tell." But from the state of the Star Tribune, it may be the latter. - George White
And another British take, this time suggesting the Strib might be the first major American newspaper to go under:
Will the Strib be the first domino to fall in America's newspaper crisis?
A sign of the increasingly hard times in US newspapers, as portrayed by Philip Stone, is a real eye-opener. In December 2006, one of America's ailing newspaper chains, McClatchy, sold the Minneapolis Star Tribune to a New York private equity group, Avista Capital Partners, for $530m (£271m).
At the time it was widely thought that McClatchy were the losers, having paid $1.2bn (£614m) for the paper nine years earlier. Well, McClatchy is hardly doing well nowadays but Avista's Minneapolis investment has proved to be one of the all-time financial disasters.
Avista, having invested $100m of its own money and borrowed another $430m to fund the deal, has announced that it has written down the value of its investment by 75%. And one report at the weekend claimed that the Star Tribune - known as the Strib - was facing bankruptcy.
That may well be far-fetched because Avista has said that the paper can meet its obligations. But Stone points out that the assurances are hardly convincing. Doubtless, the banks which loaned the money to Avista, Credit Suisse and the Royal Bank Of Scotland, are also going to be wary of touching newspaper investments in future.
So how is the Strib doing in terms of sales? Last week, the paper reported that its weekday circulation had dropped by 6.74%, to 321,984, in the six-month period up to March 31. Almost all US daily papers are losing sale, but that's one of the worst performances.
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