Now both daily newspapers in Chicago are in Chapter 11 reorganization. Sun-Times Media Group, whose flagship is the Chicago Sun-Times, sought bankruptcy court protection after months of financial struggles. Meanwhile, Yellow Pages publisher Idearc Inc. has also filed Chapter 11 after reaching an agreement in principle with its agent bank and a group of secured lenders on a reorganization plan. Its biggest shareholder, however, is not backing the move.
Shocked to find mention of a possible bankruptcy filing buried in Idearc’s announcement of its 2008 and Q4 results, investor Jack Corwin, who owns over 8% of the company’s stock, fired off letters to the directors urging them not to file Chapter 11 and pursue other viable options. He noted that the company had $510 million of cash on hand at the end of 2008, which could be used to pay down debt, clean up its balance sheet and avoid bankruptcy.
The board members were not persuaded by the company’s largest shareholder and the Chapter 11 petition was filed on Tuesday. Idearc said the agreement in principle it had reached with its agent bank and a steering group of major lenders should allow it to submit a reorganization plan within 30 days. The company said it expects that its total debt will be reduced from $9 billion to $3 billion, with the remainder of its bond and bank debt converted to equity.
The Sun-Times Media Group bankruptcy filing was no surprise to anyone. Former CEO Conrad Black was convicted of looting the company and sentenced to federal prison. A proxy fight this year resulted in the replacement of most board members and was followed by the exit of CEO Cyrus Freidheim, a turnaround expert who’d been brought in to try to clean up the mess.
Facing a deteriorating advertising market and huge tax liabilities from the Black era, the bankruptcy filing by Sun-Times Media Group was pretty much inevitable.
In addition to the Chicago Sun-Times, the company owns 58 smaller newspapers, all in the Greater Chicago area.