Less than two years after it was bought by a private equity group, the Star Tribune has filed for reorganization under Chapter 11 bankruptcy.
"We determined that the filing was necessary to reduce our operating costs, restructure our debt and create a financially viable business for the future," Publisher and Chairman Chris Harte said in a note to readers posted on the newspaper's Web site late Thursday.
Harte said the filing would allow Minnesota's largest newspaper to continue business as usual as it restructures.
The filing came a week after the Star Tribune and the Newspaper Guild ended talks, saying they were unable to agree on management's request for concessions.
"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," Graydon Royce, co-chairman for the Star Tribune's unit of the Guild, said of the bankruptcy filing.
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.
Unions representing more than 800 employees at the Star Tribune said in a statement that the unions have shown "the willingness of their members to make sacrifices to keep the democratic institution alive and well for future generations."
"The unions at the Star Tribune are conscious of the newspaper's financial plight and the state of the industry nationwide," said Mike Bucsko, executive officer of the Minnesota Newspaper Guild and chairman of the Inter-Plant Council, the coalition of unions at Twin Cities newspapers. "Our members have a vested interest in making sure the newspaper remains the voice of the community for years to come."
Avista Capital Partners, a private equity firm, 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.
The Star Tribune said it listed in its filing assets of $493.2 million and liabilities of $661.1 million.
Like many other newspapers, the Star Tribune has been dealing with declining print advertising.
Last fall, the paper 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 filing is the latest sign of the struggles facing the newspaper industry, which is coping with a deadly combination of high debt and declining advertising revenue amid a deep economic downturn.
In December, Tribune Co., which owns the Los Angeles Times, Chicago Tribune, The (Baltimore) Sun, The Hartford Courant and other dailies, as well as 23 television stations and the Chicago Cubs baseball team, was forced to seek bankruptcy protection because of dwindling advertising revenues.
USA Today publisher Gannett Co. this week imposed one-week, unpaid furloughs for most U.S. employees. The Seattle Times has asked some employees to take a week off, and others have frozen wages. The Seattle Post-Intelligencer is up for sale, with closure or an online-only future if no buyer is found.