Star Tribune withholds some pay to lenders (Deadbeat 'Red' Strib - Dinosaur Media DeathWatch™)

Minneapolis StarTribune ^ | July 1, 2008 | Neal St. Anthony

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Star Tribune Co. declined to make a quarterly interest payment Monday to the holders of $96 million in second-tier debt that Avista Capital Partners raised to finance its acquisition of the news company last spring.

But Chris Harte, chief executive of the Star Tribune, said in an interview that a lending consortium that holds senior debt of nearly $400 million was paid Monday.

The Star Tribune has sufficient cash to make the payment to the "second-lien" debt holders, Harte said, but chose not to as the company works to complete a debt-restructuring plan with its senior creditors and works internally on a package of expense reductions and revenue enhancements.

"If we can restructure this debt, we still have a very viable [business]," Harte said.

The newspaper in May hired investment advisers The Blackstone Group to help restructure its debt after the company's auditors warned that its revenues were dropping. By missing the Monday payment to junior debt holders, the company is in default on that debt.

The Star Tribune and the newspaper industry are in a several-year contraction as classified advertising has shifted to online advertisers; paid circulation has declined, and the ailing automobile and real estate sectors have cut ad spending.

Star Tribune revenue has fallen from about $400 million in 2000 to about $300 million in 2007, based on public filings by former owner McClatchy Newspapers and by Star Tribune officials.

"We have not been able to cut operating costs as rapidly as revenues have declined," said Harte, who declined to quantify the results. "And EBIDTA [earnings before interest, depreciation, taxes and amortization] is down dramatically."

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Tuesday morning good news

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