Perilously funded papers hit the wall
The lenders who provided the bonds for the $530 million purchase of the Minneapolis Star Tribune in 2006 have hired an investment bank to try to sell the loans at heavy discounts to either local investors or bottom-fishing hedge funds willing to take a risk on turning around the business, according to a report in Finance and Commerce, a Minnesota business magazine.
The magazine reports that the Strib’s debt, which amounts to about $430 million, is selling at prices no better than 53 cents on the dollar. Earlier this year, Avista Partners, the New York investment firm that joined publisher Chris Harte in providing equity funding for the deal, wrote off their $100 million investment.
Thus, the newspaper’s value appers to have dropped 40% in just 1½ years to approximately $218 million – assuming someone comes along to buy the newspaper’s debt at a 50% discount. That current estimated value is but 18% of the $1.2 billion that McClatchy paid for the paper when it acquired the property in 1998.
Elsewhere, the stock of Journal Register Co. plunged to a new low of 9 cents a share today after it evidently defaulted on its $640 million in debt. This effectively wipes out the investors who own more than 39 million shares of the company’s stock.