The Minneapolis Star Tribune skipped a debt payment this week. That’s just one manifestation of the impact of tight credit and declining revenues for most large newspapers. Still to be seen is how it all shakes out.
According to the newspaper’s own story, the Star Tribune is still profitable, but it did not make a $9 million quarterly payment on its $432 million in debt to conserve cash while trying to restructure.
Little noticed this week was the shutdown of the New York Sun, which was never really competitive even before the economic downturn. There’s been no word on would-be buyers since Copley put the San Diego Union-Tribune up for sale in July. And more recently the Newhouse family’s Advance Publications threatened to put the Newark Star-Ledger up for sale unless it got concessions from its unions. Union members are due to vote next week.
McClatchy’s lenders recently agreed to relax loan covenants, although the newspaper chain will have to pay slightly higher interest rates. Gannett, the biggest newspaper chain of all, was just this week put on S&P’s Credit Watch list with an eye toward downgrade.
The Minneapolis Star Tribune was sold by McClatchy last year for $530 million to Avista Capital Partners, a private equity firm. It stopped making payments in June to its junior lenders, who had financed about $96 million of the acquisition. So it wasn’t all that surprising this week when the newspaper also stopped paying its senior lenders. Negotiations are under way on a restructuring agreement, which would avoid a Chapter 11 bankruptcy filing.
Someone at the Star Tribune apparently still has a sense of humor about the situation. The online story is followed by comments submitted by readers and the web editor picked out this one to highlight as the “featured comment” in a prominent box: “I just received a bill to renew my subscription. Maybe I’ll skip my payment and see how long I continue to get a paper delivered to my home.”
RBR/TVBR observation: Tribune’s Sam Zell recently observed that classified revenues can’t fall below zero, so there is a bottom to the decline in newspaper revenues. The big dailies are facing criticism for staff cuts, but what other choice do they have? These plodding print dinosaurs have to morph into online jaguars, but many just don’t have the DNA to accommodate the change.
Publisher note: Radio/TV don’t follow the path of Newspapers – Begin now as RBR/TVBR has done, who was print for 24 years – go the path of the internet.