Next Step for Newspapers: Bankruptcy?

bankruptcy.jpgDespite some positive news yesterday, many newspaper companies are in financial trouble and will continue to slip further and further into debt. On his blog Reflections of a Newsosaur Alan Mutter offers a potential solution: file for Chapter 11 bankruptcy.

The protection offered by doing this would, among other things, allow “the ability to terminate the restrictive and anachronistic labor contracts that stand in the way of the efficient operation of a company that is literally fighting for its life,” Mutter writes. Altering these contracts is a controversial discussion but would allow the paper to cut costs.

What other advantages might there be?

Under the auspices of a bankruptcy court, Chapter 11 gives a company the right to walk away from unnecessary leases on real estate, equipment and vehicles. It also lets a company renegotiate bills owed to creditors, enabling debts to be settled for cents on the dollar. Wages, benefits and other obligations to employees usually are unaffected by a bankruptcy filing.

Filing for bankruptcy is not nearly a perfect solution, nor is it a permanent one. It might, however, buy some newspaper companies enough time to continue surviving long enough to figure out a sustainable business plan. Whether they deserve this chance or not is up for debate.