The Minneapolis Star Tribune filed for bankruptcy, becoming one of the biggest U.S. newspapers yet to financially flame out under a heavy debt load and a punishing decline in advertising revenue, reported Reuters.
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.
"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 company 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.
For Avista, the December 2006 deal proved to be done at just the wrong time, as advertising woes worsened and more people left the paper behind, seeking free news on the Web.
At the time, Avista's chief dealmaker on buying the Star Tribune, OhSang Kwon, 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. The paper also cut costs in other ways. Eventually, some unions representing employees at the paper did not agree to cutbacks. Shortly after, the Star Tribune filed for bankruptcy.
The Star Tribune has said it will continue to publish. It also is profitable, though 2008 earnings before interest, taxes and debt payments were about $26 million -- down from $115 million in 2004, it reported.
Other publishers face more trouble.
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.