Posted by Bud on September 04, 2009 at 10:18:15:
From the Friday edition of the Chicago Tribune:
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Chicago Sun-Times rescue bid near, sources say
Jim Tyree's investor group may seek new labor concessions; plan may use GM-Chrysler model
By Julie Johnsson and Michael Oneal
Tribune reporters
September 4, 2009
Chicago may remain a two newspaper town after all.
Sources said that Sun-Times Media Group Inc. expects within days to file a plan of reorganization in its Chapter 11 bankruptcy case that will center on a rescue bid for the company from an investor group led by Chicago businessman Jim Tyree.
The dollar amount of the bid was unclear, but it will include cash, an assumption of liabilities and assurances of additional financial resources, the sources said.
Most importantly it would give the parent of the Chicago Sun-Times and dozens of suburban papers and their Web sites a new lease on life, at least for now.
With the newspaper industry under siege from the Internet and roiled by the recession, the future of Sun-Times Media has been in doubt for months. It is quickly running out of cash and will likely have to be liquidated if the bid by Tyree, chairman of Chicago's Mesirow Financial Holdings Inc., falls apart.
That could still happen if the company's battered unions fail to go along. Sources said the offer is expected to be contingent on significant labor concessions that could include making permanent a 15 percent cut in compensation that workers agreed to in the spring, shortly after Sun-Times Media filed for bankruptcy protection on March 31.
The auction process leaves Tyree with a brief window to negotiate wage and benefit cuts from workers already suffering from months of cutbacks as Sun-Times management raced to slash spending. Rank-and-file members, who have yet to see what will be demanded of them, could balk if Tyree asks for much more.
Sun-Times Media Chairman Jeremy Halbreich, who briefed his labor leaders on the company's financial situation and sale prospects at a meeting Thursday, said he had no comment on a potential filing or bid. Tyree, who first indicated his interest in Sun-Times Media in May, also declined to comment.
Sources said the plan is to split Sun-Times Media into a "good" company and a "bad" company using the same part of the federal bankruptcy code employed in this summer's General Motors and Chrysler bankruptcy cases.
Under the rules, Tyree's offer will be treated as a "stalking-horse" bid by the court. That means competing bidders, if they exist, will have several weeks to step forward and create an auction for the company or its individual assets.
Sources said the good company would include all of Sun-Times Media's papers and Web sites. It would emerge from court first with a clean slate.
The bad company would include the approximate $600 million tax liability left over from when the once-global media concern was run by now-imprisoned former press lord Conrad Black and paroled former Publisher F. David Radler.
Sun-Times Media has burned through tens of millions of dollars in cash over the past year and despite cost cutting is still far from profitable. In July, the latest figures available, the company had negative cash flow of $3.8 million, leaving it with only $19.3 million on hand.
For that reason, many observers have scratched their heads over Tyree's interest in the company. Although the Sun-Times has consistently drawn a loyal audience of urban and blue-collar readers who have viewed it as a scrappier alternative to the Chicago Tribune, its operating problems mean a new owner may have to fund losses indefinitely.
Worse, given that Tribune Co., the Chicago Tribune's parent, is also in Chapter 11, it's not clear how many newspapers the region can support.
Sun-Times Media has developed a market in the suburbs by assembling a string of lucrative community papers stretching from the Wisconsin border to northwest Indiana. But the flagship city daily gets less national advertising than the Tribune. And it has fewer readers and a less lucrative demographic.
In the spring, when Tyree first said he was forming a group to bid on Sun-Times Media, he acknowledged that the company's papers face tall hurdles. But he also said he saw great potential in the Sun-Times franchise.
"What I think our group could bring to the table is strategic planning and capital planning to look at it a different way, an innovative way," Tyree said. "You look at the revenue here. It's well over $200 million. I've got to tell you, you ought to be able to make money at that."
Halbreich has said that several parties looked at the company over the summer. But Tyree's group appears to be standing alone at the altar now.
"We'll do everything we can to put a fair deal together," Tyree said in May. "If somebody wants to pay more, God bless them."
Tribune media columnist Phil Rosenthal contributed to this report.