January 15, 2009

Star Tribune files Chapter 11 petition

The Star Tribune, Minnesota's largest newspaper, has filed for Chapter 11 bankruptcy protection amid rising debt and declining ad revenue, the newspaper said.

In a statement Thursday night, Publisher Chris Harte said the development would not affect the newspaper's operations, including home delivery, advertising, news reporting.

We intend to use the Chapter 11 process to make this great Twin Cities institution stronger, leaner and more efficient so that it is well positioned to benefit when economic conditions begin to improve, Harte said.

The petition was filed Thursday night with the U.S. Bankruptcy Court in the southern district of New York. The Star Tribune has missed a number of payments to lenders, and has listed its assets as $493.2 million and its liabilities as $661.1 million. The newspaper was acquired less than two years ago by Avista Capital Partners, a private equity group based in New York.

Alan Mutter, an analyst and former newspaper executive based in Silicon Valley, said the newspaper business is in a period of sustained pain.

The employment ad business has been melting away since 2000, he said. Automotive has been falling apart for the last couple of years. And I don't even have to explain about real estate.

The Star Tribune has cut its workforce and renegotiated contracts with unions representing its employees in recent years. Harte asked unions for further cost reductions totaling $20 million in December.

Graydon Royce of the Star Tribune unit of the Newspaper Guild said the union is committed to the future and the survival of the paper.

It's unfortunate that a New York-based private equity company has put the Twin Cities largest source of news and information at risk, he said.