Star Tribune to ditch bankruptcy--and Chris Harte

The Minneapolis Star Tribune would emerge from Chapter 11 bankruptcy this fall with $100 million in debt and be worth between $118 million and $144 million, including real estate under a reorganization plan filed by the newspaper.

However publisher Chris Harte (a former Beacon Journal publisher) and Avista Capital Partners will walk away with nothing. Harte said Thursday he will leave before the Strib emerges from bankruptcy.. A new board of directors would be formed prior to emergence and a new publisher and chief executive put in place.

The plan that Avista said has the approval of creditors who hold approximately $384 million in secured debt and $96 million in unsecured obligations.

Unsecured creditors would receive a small cash distribution or new common stock and warrants in the newly reorganized company. The value to those creditors would be a penny on the dollar.

The Star Tribune's current owners, majority stakeholder Avista Capital Partners and the Chris Harte Family Trust, would be out of the ownership picture and walk away with nothing.

Harte said the reorganization plan was drafted in consultation with senior lenders and the committee for unsecured creditors.

"This is our plan. We believe it will be acceptable to the majority of people [creditors] who will vote on it," Harte said in an interview.

A hearing is scheduled for July 29 in U.S. Bankruptcy Court in New York, where any objections can be made. That would be followed by a scheduled Sept. 17 confirmation hearing. Harte told Star Tribune employees in a memo last night that the company would officially leave Chapter 11 "a few weeks later."

The Strib will end contributions to unions' pension plans, and has pushed some into the company-owned plan. However, that plan currently underfunded to the tune of $27.4 million. Unless the economy rebounds, the new owners could kick in up to $11.6 million between 2010 and 2015.

Click on the headline to read the story. To read more details, check the Minnipost.com.

The business
The Strib claims 65 percent of the region's readership, with a website averaging 83 million page views per month over the past six months. The latter is a 60 percent jump from last year.

However, the web only accounted for 7.1 percent of the company's total 2008 revenue, which works out to $17.5 million from online. (There's no breakout for this year.)

Meanwhile, total revenue fell $58 million in the same period — another vivid illustration of how online gains don't make up print losses. The Strib, a $397 million operation in 2000, is on track to be under $200 million this year, based on monthly reports filed with the court.

Circulation revenue fell from $65 million in 2005 (pre-Avista) to $55 million in 2007 to $48 million last year.

In 2008, the Strib missed $20 million in loan payments last year, which led to the bankruptcy. Under the new plan, the Strib will pay at least $8 million a year, or $2 million per quarter. (Details below.)

Under Avista, the Strib shed 384 jobs in 2007 and 232 in 2008. It had 1,341 full-time-equivalent positions when it filed for bankruptcy in mid-January, and has rid of 59 more positions so far in 2009.


Here is Harte’s memo to the staff

Bankruptcy Update: A Major Milestone

By Chris Harte, Publisher
I am pleased to report that we have reached a major milestone in our financial restructuring. Today, we have filed with the bankruptcy court our proposed Plan of Reorganization and a related document called the Disclosure Statement. The Plan sets out how our creditors’ claims will be resolved and provides the roadmap for our emergence from Chapter 11 later this year.

The filing of the Plan follows months of negotiations with our first lien lenders, our second lien lenders, the unsecured creditors’ committee, and other parties.

Generally speaking, the Plan provides for the first lien lenders to receive new common stock and new secured term notes for their claims. Holders of unsecured claims will receive either a small cash distribution or new common stock and warrants for stock to be issued in the future if the company achieves certain financial targets.

Previously issued equity will be cancelled and will not result in any recovery to the owners. The Plan also provides for the reorganized company to emerge from bankruptcy as a privately held enterprise.

The draft Disclosure Statement filed today includes information about the proposed Plan of Reorganization that is intended to assist eligible creditors in determining whether or not to vote to accept the Plan.

Approval of the Disclosure Statement and related voting solicitation procedures, which we will seek at a bankruptcy court hearing scheduled for July 29, 2009, will permit us to solicit creditor acceptances for the proposed Plan and seek confirmation (approval) of the proposed Plan by the court. If the Plan is confirmed by the court, we can emerge from bankruptcy.

This process will take at least a few months. If all goes according to schedule, we expect to have our confirmation hearing in September and to emerge from bankruptcy a few weeks later - sometime in autumn 2009.

In other words, the end is in sight. Meanwhile, we continue to make good progress in positioning the company for future success. Our agreements with the Fleet, Mailers, Pressmen, Platemakers, Typographers and Guild are major achievements. We hope to reach similar agreements with the remaining unions shortly.

As I have written previously, we are fully confident that the Star Tribune Company will emerge from bankruptcy in vastly better shape than when it entered, much more ready for the intense competition in a rapidly evolving news and information industry. We will continue to provide our readers an outstanding news and information package, and our advertisers with customers they want to reach, and we will do it in print, online, on mobile devices, and in other new media as they develop.

Thank you for all your hard work, dedication and sacrifice during these many months of uncertainty, hardship and belt tightening. Your continued commitment to serving our customers, advertisers and community are the key to our success. Thank you for all you do every day.