It’s probably a lot like what’s going on wherever they’re putting out a newspaper these days, according to Lauren Fine. She’s a former Merrill Lynch media industry analyst – considered one of the country’s best newspaper watchers. She’s now teaching at Kent State University.
She doesn’t have any direct knowledge of the situation in Minneapolis. But Fine doesn’t think the Star Tribune’s owners brought in the Blackstone Group in preparation for a bankruptcy.
Its sounds more like a sub-prime mortgage, as Fine explains it:
“My guess is that if there were covenants at any time that they could be coming dangerously close to breaking through them, and this would be the time ahead when you hit those problems, that you would look for alternatives. And alternatives could range from trying to get an infusion of equity. It could be renegotiating to a different type of instrument that maybe has no near term cash pay component, but maybe something that defers those payments to later. It could be something that takes into account new covenants and doesn’t change the interest rate structure… I’m guessing, but I imagine that they’re facing some severe pressure points right now.”
She’s not putting any odds on a workout. Fine ran through a list of other scenarios for the endgame for the Newspaper(s) of the Twin Cities. Here’s her run-down, from likeliest to the longest shot:
● A joint operating agreement with the Media News-owned Pioneer Press that would combine back shop and production resources and leave the newsrooms separate. Whether they are “intact” would be another matter altogether. “If they are interested in a JOA, I doubt the Justice Department would have a problem with that,” says Fine.
● An acquisition of the Star Tribune by MediaNews. It would be difficult for the bigger paper to buy a smaller competitor under the Newspaper Protection Act, but if the Strib does declare bankruptcy, it could help satisfy the NPA requirement that an acquired property be “failing.” But Fine and other industry observers don’t think Media News is in any condition to be borrowing for or spending money on any acquisitions either.
● The Hail Mary. The Capital Times in Madison, Wis., recently quit publishing a paper and went online only. It slashed costs, but doesn’t allow them to monetize sheet after sheet of newsprint any more, whether anyone reads through the “Bargain Pet” classifieds or not. The online revenue today is only a fraction of the print revenue, and Fine doubts there’s enough time for the two to converge in Minnesota.
● Stop the presses. Businesses close down all the time, some of them quite substantial. Bear Stearns started in 1923 and survived the Great Depression. But not the foreclosure meltdown. It had more than 15,000 employees when J.P. Morgan bought it at fire sale prices. “The option would also be to basically say, ‘You know what? This isn’t working,” says Fine. “We’re really sorry. You have another paper. It’s a great paper. We made them a better paper by virtue of competition, but we’re sorry, we can’t afford this any more, we’re shutting the doors. I doubt that would happen.”
You can hear the whole 7 minute Megillah right here.