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Bringing in Blackstone, (Red) Star Tribune means business (Dinosaur Media DeathWatchâ„¢)
Minneapolis StarTribune ^ | May 6, 2008 | Chris Serres

Posted on 05/06/2008 4:40:22 AM PDT by abb

The Star Tribune's hiring of private equity powerhouse Blackstone Group could result in a fundamental restructuring of the paper's debt, a process that may include anything from new loan terms to additional equity investors in the paper...

Such a restructuring, coming only 15 months after Avista Capital Partners took possession of the Star Tribune, reflects just how rapidly the newspaper business -- and the credit markets -- have deteriorated in the past year. Across the country, in big cities and small, newspapers are struggling with declining readership and steep declines in advertising, especially lucrative real estate and automobile classifieds.

McClatchy Inc., the former owner of the Star Tribune, has seen its stock price plunge by 76 percent since it agreed to sell the paper to Avista in December 2006. The Journal Register Company, a publicly traded publisher that owns the New Haven Register, has hired an investment banking firm to help restructure the debt it incurred when buying a string of small dailies in Michigan. And last year MediaNews Group, owner of the St. Paul Pioneer Press, agreed to pay slightly higher interest rates in return for an amendment to its long-term debt.

Star Tribune publisher Christopher Harte said Sunday that the Star Tribune was current in its debt obligations. He dismissed as untrue a New York Post story that said the newspaper was "on the brink of bankruptcy." The Star Tribune's annual revenue fell $75 million between 2005 and 2007.

But the Star Tribune's decision to hire the Blackstone Group indicates the newspaper is trying to deal with the financial ramifications of this decline head-on, before it becomes a full-blown crisis, said analysts. "They see the iceberg ahead and they hired Blackstone to try to manipulate the rudder and change course before they hit it," said Tom Corbett...

snip

(Excerpt) Read more at startribune.com ...


TOPICS: Business/Economy; Extended News; News/Current Events
KEYWORDS: advertising; dbm; newspapers; startribune
Their words: "restructure debt" Translation: "bankruptcy"
1 posted on 05/06/2008 4:40:23 AM PDT by abb
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To: 04-Bravo; aimhigh; andyandval; Arizona Carolyn; backhoe; Bahbah; bert; bilhosty; Caipirabob; ...

ping


2 posted on 05/06/2008 4:41:17 AM PDT by abb (Organized Journalism: Marxist-style collectivism applied to information sharing)
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To: abb

from the comments section in the Strib today:

Will the Star Tribune censor...

...these comments, too? In their first story over the weekend eight people left comments. When they weren’t going in the Star Tribunes favor they were deleted and no more comments were allowed.
posted by Average_Joe on May 6, 08 at 6:15 am |
1 of 1 people liked this comment.


3 posted on 05/06/2008 4:59:41 AM PDT by abb (Organized Journalism: Marxist-style collectivism applied to information sharing)
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To: abb

This is an opportunity! If a conservative group could buy up the Red Star we might finally have a strong voice in Minnesota.
Hey, I can dream, can’t I?


4 posted on 05/06/2008 7:03:27 AM PDT by 95 Bravo ("Freedom is not free.")
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To: 95 Bravo

Anyone can buy used printing equipment and a building.

Why would a “conservative” want to be saddled with a staff that is 90% liberal? There’s no reason to pick that fight.


5 posted on 05/06/2008 7:35:16 AM PDT by ConservativeMind
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To: ConservativeMind

Then the first press run would be pink slips.
Rebuild with a staff of conservative writers. They can’t all be liberals.
We piss & moan about how our viewpoint isn’t represented by the media in this town. Wouldn’t it be nice to change that if we could? We could at LEAST shoot for something that’s relatively even-handed in viewpoint, could we not?
Like I said, I can dream.


6 posted on 05/06/2008 7:47:10 AM PDT by 95 Bravo ("Freedom is not free.")
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To: abb

Hopefully chapter 7 not chapter 11. Total liquidation would be sweet.


7 posted on 05/06/2008 9:38:08 AM PDT by MovementConservative (John Roberts and Sam Alito.... Thank you GWB)
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To: 95 Bravo

Newspapers are passe. The news in them may have been interesting yesterday. It’s the online portion of the paper that is of interest.


8 posted on 05/06/2008 9:41:57 AM PDT by MovementConservative (John Roberts and Sam Alito.... Thank you GWB)
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To: MovementConservative

http://blogs.citypages.com/blotter/2008/05/how_bad_is_it_f.php

How bad is it for the Strib?: Questions and answers from independent reports
Filed under: Media

Reporters examining the Star Tribune’s finances can be compared to a group of blind men reporting on an elephant. No one source, not even the paper’s higher-ups themselves, seems to have all the answers.

Here, we’ve isolated some critical outstanding issues that everyone is wondering about. Using industry reports and outside sources, we offer the following informed speculation on where the paper stands now and what’s to come.

How bad is it for the Strib financially?

Unclear, but not a disaster so far. Industry reports on the Strib’s fiscal health are surprisingly sanguine. Dun & Bradstreet is the leading provider of credit information on businesses and corporations. We acquired their comprehensive reports on both the Star Tribune and its parent company, Avista Capital Partners.

The likelihood that the Strib “will experience financial distress in the next 12 months” or “will not pay [its creditors] on time over the next 12 months” is listed as “low,” and is well within the zone considered safe. In 2007, firms with this classification had a failure rate of just 1.2 percent.

This does mean that the Strib’s version of events (they’ve successfully paid debts up until now, and are looking to restructure financial obligations to avoid a future day of reckoning) is more likely to be true than the Post’s doom-and-gloom scenario. This does not mean there aren’t gathering storm clouds.

The data is not all rosy — the Strib gets a mixed rating compared to its media company peers — but it’s not ashes and sackcloth, either.

Why is this story coming to light now?

Multiple possibilities. The hiring of private equity firm Blackstone Group to help sort out upcoming financial challenges is certainly newsworthy, so maybe the Occam’s Razor explanation — the press discovered new information and ran with it — is valid.

But I talked with two financial services experts not connected with the situation yesterday, and each offered a different possible theory about why the New York Post story hit at this time. Either are plausible. Neither is necessarily mutually exclusive from the other.

One, a longtime national business journalist, floated the possibility that Avista themselves leaked the story in advance of trying to sell the Strib. With media companies proving to be a less profitable investment than other capital strategies, it’s possible that the firm has decided to sell and is using this story to fuel perception that the paper can be had for a bargain-basement price. Another source, a former CEO, said the timing of the story suggests it’s a tool to use in upcoming labor negotiations.

Both of these are speculative opinions, to be sure, but both are possibilities that locals have considered as well. We have calls in to both Blackstone and Avista that have gone unreturned thus far. We will update this post as new information becomes available.

What are the chances this is a scare tactic in the pending labor negotiations with the Guild?

Possible. As MinnPost’s David Brauer has noted, the union is skeptical about the story’s timing, and I think they have good reason to be. Aside from the obvious — contract negotiations begin next week, and this is a weighty cudgel for management to swing — labor costs are among the Strib’s most significant expenses.

More on the reasoning behind this in the next answer.

What powers will the Blackwell Group have? How has Blackwell acted in past instances where they were so empowered?

A primary part of Blackstone’s strategy has been reducing labor costs, including reducing wages among unionized staff. During its work with Delta during the airline’s bankruptcy, union pilots were asked to take a pay cut of 30 percent.

This is a different situation than Delta’s, because there is no Chapter 11 filing (at least not yet). A better example might be Blackstone’s work with Xerox in 2001.

Rumors of impending bankruptcy started to swirl when the company hired Blackstone. In about a year’s time, Xerox came back from the brink — after shedding 10 percent of the workforce.

Yes, there were other measures taken, like raising capital and “improving operational efficiency.” But there’s a pattern here of slashed wages and layoffs. For a fascinating background on firms like Blackstone, which are largely unregulated, I recommend the In These Times story “Pirates of Private Equity.”

Given the $4.1 billion acquisition of Bristol Myers Squibb on Friday, could Avista be trying to liquidify cash for this deal?

Highly unlikely. Avista has Scrooge McDuck money. Because they aren’t a public company, financial data on them is limited, but we were able to run down some hard facts.

The Dun & Bradstreet report on Avista rates their financial health as very high, and their credit risk as extremely low. The report says their financial stress is minimal and the likelihood they’ll experience cash flow problems over the next 12 months quite small. Even compared to other wealthy private equity partnerships, their balance sheet is favorable.

Buying Bristol Myers Squibb to them is probably like buying a new car to you and me. A significant investment, but not one likely to require freeing up capital.

Posted by Jeff Shaw at May 6, 2008 6:39 AM


9 posted on 05/06/2008 9:42:18 AM PDT by abb (Organized Journalism: Marxist-style collectivism applied to information sharing)
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To: MovementConservative

If the Red Rag goes under so be it. The Strib is an echo chamber of the Left.
Circulation can’t grow if a large portion of your market (conservatives) won’t buy your product because they don’t trust a word that’s printed in it.
This is an opportunity to take away a major media organ of our enemies & turn it against them, if someone was willing to try. That’s all I’m saying.


10 posted on 05/06/2008 9:59:51 AM PDT by 95 Bravo ("Freedom is not free.")
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To: 95 Bravo; abb

Start a new newspaper, but don’t buy into an albatross in which you have to “clean house,” risking lawsuits and loss of goodwill (basically the pleasant thoughts of liberals in the circulation area as the goodwill is based on liberal articles).

A piece of poop, with perfume, is still a piece of poop.

Let the liberal paper die and buy its assets at an incredible price. Anything else is buying into a losing proposition.


11 posted on 05/06/2008 10:25:09 AM PDT by ConservativeMind
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To: ConservativeMind

I bow to your wisdom. I hadn’t considered that.


12 posted on 05/06/2008 12:41:33 PM PDT by 95 Bravo ("Freedom is not free.")
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To: abb
"They see the iceberg ahead and they hired Blackstone to try to manipulate the rudder and change course before they hit it," said Tom Corbett...

"And right after we have set a new course, we're gonna start rearranging the furniture."

/loser

13 posted on 05/06/2008 2:16:11 PM PDT by andyandval
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To: 95 Bravo

Why would a conservative want to invest in an obsolescent business model?


14 posted on 05/06/2008 9:33:39 PM PDT by MrEdd (Heck? Geewhiz Cripes, thats the place where people who don't believe in Gosh think they aint going.)
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