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Monday, May 5, 2008
The New York Post is claiming that the 26-year-old Minneapolis-St. Paul newspsper, the Star Tribune is on the verge of bankruptcy and Avista Capital Partners stood to lose its entire $100 million investment. There have been rumors to this effect for some time, but the Post was the first to officially state the rumors as fact. Star Tribune publisher Chris Harte promptly issued a statement last night as well as a memo to his staff this morning, assuring them that the Star Tribune has sufficient liquidity, is generating cash flow and is currently on track with all debt obligations. While Harte denied the bankruptcy rumors, he acknowledged that the newspaper had indeed hired the Blackstone Group, as had been alleged by the NY Post.
"We recently hired the Blackstone Group to help us evaluate alternatives to our current capital structure, but that hardly merits a conclusion that we are near bankruptcy," Harte said in a statement released shortly after 6 p.m. Sunday evening. "In fact, Blackstone has substantial expertise in balance sheet restructurings through means other than statutory proceedings like bankruptcy."
While its true that nothing is official yet, hiring a large financial advisory firm to restructure a company is usually not a sign of health and financial stability.
Check out City Pages.com for complete coverage.
Here is the memo Chris Harte issued to his Star Tribune employees this morning:
This is not the way I prefer to greet you on Monday morning, but a story in the New York Post over the weekend requires a direct and corrective response. I am writing to reassure you unequivocally.
The Post reported that the Star Tribune has failed to meet its debt obligations and alleged that we are "on the brink of bankruptcy." We have no idea where this information came from, but we do know it is not accurate.
The facts are that the Star Tribune currently has sufficient liquidity and is current on all its debt payment obligations. You know that we face declining ad revenue, and you are well aware of all the steps we have been taking to get our cost structure in line with current revenue shortfalls. There is absolutely no doubt that we are in the toughest times this company and this industry has ever faced. But it is quite a leap to say we are "on the brink of bankruptcy."
We talk to our lenders frequently and constructively about the state of our business. They know that our business is in a different place than when they loaned us money, and they know why. We are in this together, and our lenders very much still want us to succeed.
As part of our problem-solving process, we recently hired the Blackstone Group to help us evaluate alternatives to our current capital structure, but that hardly merits a conclusion that we are near bankruptcy. In fact, Blackstone has substantial expertise in balance sheet restructurings through means other than statutory proceedings like bankruptcy.
None of the current discussions we are having about our financial structure has any effect on our current operations. We are generating positive cash flow and paying our bills.
The most important thing we can do right now is to stay totally focused on keeping our 140-year-old franchise in its market leadership position by putting out the best and most comprehensive news and Internet products in this region. We cannot be distracted by speculation about our future.
It's true we have big challenges and many struggles ahead. I can't begin to predict how all this will play out, and neither can anyone else — especially the New York Post. But I can predict that our best strategy for a successful outcome is to stay focused, day-in-and-day-out, on building our business through outstanding service to our readers and advertisers — regardless of what hand the economy deals us. I know with high confidence that we have the people and the resources to do that.
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