(Red) Star Tribune's owner forced to write off much of its investment (Dinosaur Media DeathWatch™)

Minneapolis StarTribune ^ | May 7, 2008 | Neal St. Anthony

[abb]

The owner of the Star Tribune has informed investors that it has written down the value of its $100 million investment in the newspaper by 75 percent to reflect deteriorating conditions since the purchase in March 2007.

"In the past year, the newspaper industry has suffered greater than expected declines in circulation and advertising revenue, particularly in print classified advertising," the memo from New York's Avista Capital Partners said. "The outlook in the near to medium term remains uncertain."

The write-down, taken at the end of 2007, reflects the estimated loss of value and is consistent with the falling stock prices of publicly held newspaper companies such as McClatchy and the New York Times. Avista's public accountants required the private equity firm to write down or "mark to market" the estimated value of the Star Tribune.

The memo denied a recent report in the New York Post that the Star Tribune may file for bankruptcy.

"The Star Tribune currently has sufficient liquidity and is up to date on all its debt payment obligations," said the memo, distributed by Avista.

The bankruptcy speculation followed the revelation that the Star Tribune has hired Wall Street's Blackstone Group, the financial advisory and restructuring firm, to analyze its balance sheet and business options.

Avista paid $530 million to acquire the Star Tribune in early 2007 from McClatchy Newspapers. McClatchy paid $1.2 billion for the newspaper in 1998, before Internet publications and advertising competitors started to cut into newspapers' circulation and advertising revenue.

The value of Avista's Star Tribune-related debt also reflects a serious erosion in the value of the company over the past year.

snip

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ping

[swatbuznik]

That’s right, Trib, blame the internet for your money woes. Cling to that belief.

[abb]

Much more.

http://www.minnpost.com/davidbrauer/2008/05/07/1760/amid_bankruptcy_talk_strib_ponders_cuts_the_newsroom_actually_likes
Amid bankruptcy talk, Strib ponders cuts the newsroom actually likes

http://articles.citypages.com/2008-05-07/news/follow-the-money-star-tribune-s-debt-selling-at-less-than-60-cents-on-the-dollar/
The newspaper’s lien value has plummeted over the past year, showing flagging investor confidence
Follow the Money: Star Tribune’s debt selling at less than 60 cents on the dollar

http://msp.blogs.com/brianlambert/2008/05/the-paper-of-ou.html
The Strib: A Flipper’s Nightmare Come True

[iopscusa]

Looks pretty grim for Pravda, write down 75% ($750M) sure makes New York’s Avista Capital Partners credible as they said “The outlook in the near to medium term remains uncertain.....but the memo denied a recent report in the NY Post that the Star Tribune may file for bankruptcy” The financial wizards, Avista Cap, are in total denial...the end is near!

[DManA]

This is interesting because I thought the real estate owned by the Trib was worth $100 mil.

[abb]

“Worth” is sometimes a nebulous term and can change quickly. McClatchy ten years ago thought the Strib was ‘worth’ $1.2 billion.

Oops...

[Grampa Dave]

New York’s Avista Capital Partners has taken its share owners on a very expensive Enron ride.

” The owner of the Star Tribune has informed investors that it has written down the value of its $100 million investment in the newspaper by 75 percent to reflect deteriorating conditions since the purchase in March 2007.”

One wonders, “When we will be reading about share holders of this company and other investment shells and mutual funds suing those who burnt up their money?”.

It would be very interesting to see where and how those who control Avista donate their political $’s.

[DManA]

I hadn't thought downtown MPLS real estate had taken such a tumble. Unless something else is going on here.

“Worth” is sometimes a nebulous term and can change quickly

[Eric in the Ozarks]

Expect a bill to be introduced in the Minnesota House to provide financial assistance to the paper and long term salary protection to Strib employees.
It will work as well as the Northwest Airlines bailout did.

[abb]

Newspapers and other broadcast media have always had a very high ‘goodwill’ component compared to book value. Book value being tangible assets like property, plant and equipment - stuff that can be turned into cash money. Perhaps the downtown real estate can sell for $100 million. But that’s the only tangible asset they have to sell. Printing presses are basically worth scrap metal prices now.

The value of newspapers has always been in their ability to deliver ‘eyeballs’ to advertisers. They manufacture nothing. They are a distribution system.

And now that ‘eyeballs’ are not looking at newspapers or television - the eyeballs have migrated to the internet - their value to advertisers is rapidly decreasing.

[Milhous]

It would be very interesting to see where and how those who control Avista donate their political $’s.

FWIW Avista's site enumerates these partners:

• Thompson Dean
• James Finkelstein
• Larry Pickering
• David Burgstahler
• Robert Cabes
• David Durkin
• OhSang Kwon

This crew works under the auspices of Credit Suisse, the second-largest Swiss bank.

[DManA]

Speaking of NWA, did you see they're trying to use the hub as a bargaining chip to weasel out of the money they owe tax payers if they move their headquarters? If the hub makes economic sense Delta will keep it. If not it's gone. My advice to the Gov is get the money, get it in cash, get it NOW.

[Grampa Dave]

Thanks Milhous.

Liz could you check these guys out and see if they are political contributors and to whom.

I have an appointment with a new Fly Rod.

Thanks

FWIW Avista’s site enumerates these partners:

Thompson Dean
James Finkelstein
Larry Pickering
David Burgstahler
Robert Cabes
David Durkin
OhSang Kwon

[DManA]

Let's say for the sake of argument (or more accurately for the sake of you teaching and me learning) that the property is worth $100 mil and the newspaper is worth nothing. I don't see how they can write down 75% if their investment. It would seem that they are saying the real estate is only worth $25 million. Their headquarters building on on some of the most desirable land in the city.

[george76]

75 percent

[Liz]

Will do.....but I want some of the catch for my dinner (grin).

[Grampa Dave]

Wonder where all of the negative so called finacial experts are when b$ like this happens?

[abb]

I understand what you’re asking now. I think Avista isn’t the only entity that owns part of the Strib. It looks like they put up $100 million themselves, maybe. I can’t recall who was in the deal with them, or if they borrowed money from banks or what.

I’ve got to be gone for most of the day. When I get back, I’ll dig up the particulars of the transaction from last year.

[Eric in the Ozarks]

Be sure and locate the “hub” someplace that everyone will want to use. Babbitt, MN comes to mind.