The New York Post reports that our local newspaper, the Minneapolis Star Tribune, teeters on the edge of bankruptcy. The paper has traded hands twice in the last ten years, the latter transaction in 2006 coming at half of the price of the former. It now appears that Avista Capital Partners still overpaid:
The Minneapolis Star Tribune, reeling under a heavy debt load and plummeting advertising sales, is on the brink of bankruptcy, The Post has learned.
One of the nation’s top dailies, “The Strib,” as it is known to readers in the Twin Cities, recently hired the Wall Street powerhouse Blackstone Group to restructure its balance sheet after failing to meet its debt obligations, according to people familiar with the company.
The broadsheet is unlikely to shutter its doors, but its creditors, including the banking giant Credit Suisse Group, figure to eventually end up controlling the paper. Down the road, the creditor group could then sell it after dramatically cutting costs.
The private-equity firm Avista Capital Partners, run by former Credit Suisse deal maker Tom Dean, purchased the Star Tribune from the McClatchy Co. in 2006 for $530 million. The New York firm, which put up $100 million of its own money and borrowed the rest, stands to lose its entire investment, sources said.
When McClatchy sold the Strib in December 2006, many of us pointed to the fire-sale price as an indication of how badly the editorial direction of the paper had devalued it, while Avista insisted that it would keep essentially the same management team in place. Anders Gyllenhaal left for Miami and Avista recruited Par Ridder from the Pioneer Press, leading to an embarrassing lawsuit last year after it came out that Ridder had e-mailed Strib management some privileged information on the competitor.
I’m not exactly bubbling over with schadenfreude with this news. For one thing, I have friends at the Strib, whose livelihoods may disappear through no fault of their own. Second, the Pioneer Press is hardly a world-class newspaper, although it works well for a local broadsheet. I would have much preferred that the Strib fix its problems, most of which originate in its editorial positions, and produce a newspaper that valued truth and objectivity more than wheezing for its pet political issues.
The world will have its eyes on the Twin Cities this summer, when the Republican National Convention comes to St. Paul. We should have a metropolitan newspaper that can show leadership in covering one of the biggest national stories of 2008. Instead, we’ll have to rely on the wire services and newspapers from hundreds of miles away, unless the Strib and Avista gets its act together and make the major changes necessary to instill credibility at the paper. (via True North)