Saturday, September 27, 2008

When the going gets tough, someone sues

This unusually candid story from the San Diego Union-Tribune about the economic decline of newspapers gives a more realistic view of the state of the industry than any take by Editor & Publisher.
Things haven't gone smoothly in Minneapolis, either. In May, the Star Tribune reported that Avista had written down $75 million of the $100 million it invested in the purchase, reflecting the estimated decline in the paper's value.
Then in June, the company skipped a payment to secondary debt holders as it sought a restructuring plan with the senior creditors who hold the largest chunk of the debt. The company said it had enough money to make the payment, but chose not to as it worked to restructure the debt while also cutting costs and trying to boost revenue.

There's worse.
  • Family-owned Landmark Communications put itself up for sale at the start of the year and succeeded in selling the Weather Channel to NBC Universal, but it has yet to announce a buyer for its nine daily newspapers.

  • Investors have fled publicly traded newspaper companies in the past year, driving down the stock price of McClatchy about 80 percent, Gannett about 60 percent and The New York Times Co. about 20 percent.

  • Standard and Poor's reported in June that the group, Philadelphia Media Holdings, had missed a payment on secondary loans and was in talks with senior creditors for relief. The group reportedly fell below the debt-to-cash-flow ratio required by its senior lenders, who then blocked a payment to a secondary group of lenders.
Philadelphia Media Holdings bought the Philadelphia newspapers dumped by McClatchy after they bailed out bought Knight Ridder.

Copley is trying to sell the San Diego Union-Tribune. Without much success.
Oh, and Sam Zell is being sued by present and former employees in a class action lawsuit in which they call the sale to Zell "a scam." That sale has mired the company in $13 billion of debt. The litigants are worried about their pension plans that are saddled with Tribune stock.

From Fortune magazine: "For Zell, more Tribune hell" Subhead: A suit filed by his own employees re-opens the question of how the billionaire bought so much for so little
In a more interesting vein, the suit also alleges that the Tribune's board was seduced into approving the deal in April 2007 by the allure of $25 million in incentive payments to top management and that it therefore overlooked more attractive alternatives and the fact that Zell's plan would foreseeably gut employees' pension benefits.
The plaintiffs are Dan Neil, a Pulitzer-prize winning auto critic who is still employed at the Times, while former writers Corie Brown (a food-and-wine critic), Henry Weinstein (legal affairs), Walter Roche, Jr. (a Baltimore Sun as well as L.A. Times veteran), Myron Levin (consumer affairs), and Jack Nelson (once a Pulitzer-prize winning D.C. bureau chief) are the other proposed class representatives.

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