Strib defauls

The Newsosaur brought word yesterday that the Minneapolis Star Tribune defaulted for the second straight quarter on debt payments. The former KRT paper that was spun off in the McClatchy deal to avoid conflict issues (MNI already owned The St. Paul Pioneer Press).

The Strib was purchased in Dec. 2006 by a private equity group, Avista Partners, made up of former investment bankers. At the time The Star Tribune has a paid circulation of 361,172 daily copies and 596,333 on Sunday. Purchase price was $538 million, less than half what McClatchy paid for purchase in 1998. At the time of the deal the paper was reportedly still earning a profit.

To finance the deal, Avista borrowed $340 million initially and nearly $100 million a year later. Since then it has been forced to write-down most of the newspaper’s value and now, because of falling advertising revenue, finds itself unable to meet the payments on the remaining debt estimated at about $436 million.

The company is in the process of attempting to restructure the debt, but that will undoubtedly bring higher interest payments. MNI recently had to cut a similar deal and rates on their extended time table could top 10 percent, according to reports.

Here’s the kicker, under the circumstances some are estimating the Strib is now worth $125 million. However, that figure is based on the price one would pay to purchase all of their outstanding debt paper and not other more common ways of valuing a newspaper (i.e. cash flow or assets). But, under the circumstances the figure quoted may be charitable given the increasingly uncertain revenue picture for newspapers and that some traditional newspaper assets (such as brand or goodwill) likely have little intrinsic value at this point.

I’m sure folks at the Strib take little solace in knowing they probably aren’t alone. The Philadelphia Inquirer, another spin-off from the KRT deal, is struggling in similar waters. Also, the entire Tribune company (owners of the LA Times, Chicago Tribune and Baltimore Sun) could face default on its debt of $13 billion in the coming year according to some reports.


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1 Response to “Strib defauls”

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