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Faced with sliding advertising revenue amid a continuing slowdown of the newspaper industry, the Star Tribune said Sunday that it has hired an adviser to evaluate its finances.
The hiring of the Blackstone Group, a New York private equity firm, comes as the Star Tribune struggles to make debt payments under loan terms struck slightly more than a year ago, when projections showed the newspaper making more money than it is today.
The Blackstone announcement came after a Sunday story in the New York Post said the newspaper had failed to meet its debt obligations and was near bankruptcy.
Star Tribune publisher and chairman Christopher Harte said the Star Tribune has not filed for bankruptcy, nor is it about to.
"The Star Tribune currently has sufficient liquidity and is current on all its debt payment obligations," Harte said in a statement issued Sunday afternoon. Pressed further, he said the newspaper would not miss a debt payment this year unless things worsened.
Harte said he is in frequent contact with lenders, including Credit Suisse. None of them wants to take over the newspaper, he added.
Such a takeover could be a possible outcome of a bankruptcy filing. "Credit Suisse and the other lenders absolutely do not want to run the newspaper," Harte said in an interview Sunday evening.
Avista Capital Partners invested about $100 million and financed the remaining $430 million when it bought the Star Tribune from the McClatchy Corp. on Dec. 26, 2006. The deal closed less than three months later, but the projections for advertising revenues proved to be overly optimistic. Harte and Avista partner OhSang Kwan have both said publicly that they underestimated the newspaper industry's woes.
Annual revenue fell $75 million between early 2005 and early 2007, according to Avista. Classified advertising revenue last year was half as much as it was in 2000.
Earlier this year, the company hired Restructuring Associates Inc., a Washington, D.C., consulting firm, to work with the Star Tribune's unions to identify areas for savings and prepare for upcoming labor negotiations. Contract negotiations will begin this week with the Newspaper Guild, the paper's largest union, which represents employees in the newsroom and editorial departments as well as some in promotions and circulation.
"It's kind of disquieting to read about your company in the New York Post," said Graydon Royce, cochair of the guild's Star Tribune unit. "We have to find out what the truth is here, because we're going into negotiations and it's a period that's probably one of the most critical in the Star Tribune's history."
The Star Tribune newsroom has about 325 employees, down from 407 at the start of 2007 after two rounds of buyouts. The paper as a whole employed about 1,761 people at the end of 2007, said company spokesman Ben Taylor.
Blackstone cuts a high profile among Wall Street's private equity firms thanks to its CEO, Stephen Schwarzman, who last summer rode a wave of unflattering media coverage following revelations that he made $677.2 million in cash taking his company public while holding shares worth nearly $8 billion. Schwarzman's haul inspired congressional hearings for higher taxes on private equity firms.
Daily circulation at the Star Tribune stood at 321,984 on March 31, a 6.7 percent drop from six months earlier, according to preliminary figures from the Audit Bureau of Circulation.
Sunday circulation over the same period fell 7 percent to 534,063.
Matt McKinney • 612-673-7329