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Star Tribune files for Chapter 11

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Star-Tribune building
The Star Tribune building, in downtown Minneapolis.
MPR photo/Tom Weber

Minneapolis based Star Tribune newspaper said Thursday night it has filed for Chapter 11 bankruptcy protection.

The filing comes less than two years after Avista Capital Partners, a private equity group, bought the paper for $530 million. 

A letter to readers and advertisers posted on the Star Tribune Web site and signed by publisher Chris Harte said, "We determined that the filing was necessary to reduce our operating costs, restructure our debt and create a financially viable business for the future."

The letter says the bankruptcy filing should allow the company to continue business as usual. 

"Like many businesses, we have experienced significant revenue declines in this recessionary economy, which has put unusual pressure on our operations."

Newspapers have endured increasing competition for advertisers from the Internet for years. The recession has only compounded the problem.

In his letter Harte's said that "like many businesses, we have experienced significant revenue declines in this recessionary economy, which has put unusual pressure on our operations."

Negotiations for concessions with the union representing the paper's journalists broke off without a settlement earlier this month, apparently setting the stage for the bankruptcy.

"Obviously, I think it's unfortunate. It's not our decision, it's the company's, and we take very seriously the future of the newspaper," said Graydon Royce, co-chairman for the Star Tribune's unit of the Newspaper Guild.

      Royce added that Star Tribune employees are "very committed to keeping this institution alive."

      Union leaders said the bankruptcy filing, while expected, came as a surprise.

      "They did not give us prior notification that this was going to be filed today," Royce said.

Royce said since Avista Capital Partners purchased the newspaper in 2007, the union has lost about 100 jobs, or nearly 25 percent of the news staff. That includes 23 journalists who took buyouts this month. 

The Guild represents about 300 reporters, editors, photographers, graphic artists, videographers, support, circulation and promotional staff.

Royce said last summer the union agreed to a three year contract that saved Avista $2.4 million through pay freezes, buyouts and contract changes. In addition, the Guild accepted a new health plan that represented significant savings for the company. 

In recent negotiations, the Guild says its bargainers offered to extend a 16 month pay freeze for the entire three year contract, and suggested unpaid furloughs and reduced pension contributions as ways of reducing the Star Tribune's operating costs. 

      Avista purchased the Star Tribune in 2007 for $530 million from The McClatchy Co. That was well below the $1.2 billion McClatchy paid for the Star Tribune in 1998.

      In its filing, the Star Tribune said it listed assets of $493.2 million and liabilities of $661.1 million.

    Last fall, the Star Tribune skipped a $9 million quarterly debt payment to senior creditors to save cash as it tried to restructure its debt.

      Since 2007, the Star Tribune has made $50 million in cuts through attrition, layoffs, buyouts and other cost-cutting measures.

      In December, Harte told employees the "survival of the company" was at stake and asked labor unions to agree to $20 million in cuts by mid-January. Without those cuts, Harte said the newspaper could face bankruptcy.

      The Star Tribune ranked as the nation's 15th-largest paper last October, with weekday circulation of about 322,000 and Sunday circulation of almost 521,000. The paper has nearly 1,400 employees.

The Star Tribune's Chapter 11 filing is the second major bankruptcy by a newspaper company owned by a financial investor. 

The Tribune Company, which owns The Los Angeles Times, The Chicago Tribune and the Chicago Cubs baseball team, filed for bankruptcy last month. The company was acquired in 2007 by real estate investor Samuel Zell.