Chicago Sun-Times files for bankruptcy protection
01 Apr 2009
The unprecedented downturn in the US newspaper industry claimed yet another victim with the Sun-Times Media Group, parent of the Chicago Sun-Times newspaper, saying it had filed for bankruptcy protection yesterday.
Filing for bankruptcy in the US Bankruptcy Court for the District of Delaware, the publisher said it would continue to operate its newspapers and online sites "while it focuses on further improving its cost structure and stabilising operations" during the time it has protection from creditors under Chapter 11.
The company has retained Rothschild to act as restructuring advisor and to commence process for the sale of assets and said it has sufficient financial resources to continue the day-to-day operations during this process.
Although the company had over the past several months, taken several steps to reduce costs and strengthen the organisation, the significant downturn in print advertising has affected newspapers across the country, which also had a severe impact on the publisher's finances.
Sun-Times chairman Jeremy Halbreich said, "The significant downturn in print advertising has continued to severely impact us and unfortunately, this deteriorating economic climate, coupled with a significant pending tax liability dating back to previous management has led to today's difficult action."
Sun-Times was embroiled in a $600-million tax dispute with IRS, which began in 1996 during the time of Conrad Black and the company's finances deteriorated, when he and his close associates in the company started siphoning around $6.1 million in fraudulent "non-compete" clauses pertaining to sales of newspaper titles.
As the IRS filed fraud charges against Black and other senior associates, the company was forced to defend them due to an indemnity clause signed by the company with senior staff while hiring, of protecting them against any legal action.
Black and the senior associates were ultimately convicted of fraud by a Chicago jury in July 2007, but the company in the process of defending them, incurred $117.9 million in attorney fees as well as more than $125 million on expert fees, who were called in by the company to find out the extent of fraud carried out by Black and his associates.
In order to cut costs, the Sun-Times, like other newspaper companies in the US, has on several occasions axed jobs at all levels in the newspaper.
Four newspaper companies, including the owners of the Los Angeles Times, Chicago Tribune and The Philadelphia Inquirer, have sought Chapter 11 bankruptcy protection in recent months, due to the advertising downturn, rising newsprint costs and the migration of readers and advertisers to the internet.
In Arizona, Gannett Co's Tucson Citizen also closed down, leaving one newspaper in that city and last month Hearst said it would close or sell the San Francisco Chronicle if the newspaper couldn't slash expenses in coming weeks. (See: Philadelphia Inquirer, New Haven Register file for Chapter 11)
This month, the venerable Seattle Post-Intelligencer, Seattle's oldest newspaper, downed shutters on its print edition. (See: Hearst's Seattle Post-Intelligencer to shut print shop)
In Colorado, the 150-year old Rocky Mountain News folded up leaving its arch rival, the Denver Post as the only newspaper in the state. (See: Colorado's oldest newspaper Rocky Mountain News folds up)
Also in January, Gannett Co., the largest US newspaper publisher said it would shut down the Tucson Citizen if it could not find a buyer for the Arizona publication. It has also implemented several cost-cutting measures like unpaid leave for employees. (See: USA Today publisher Gannett asks employees to go on unpaid leave)
Jeremy Halbreich said, "We firmly believe that filing for Chapter 11 protection and exploring the potential sale of assets or new investment in the company offers us the best opportunity to protect our respected media properties for the long-term."
The Sun-Times Media Group operates 59 newspapers and many online sites like the Chicago Sun-Times, the Southtown Star, Beacon News, Courier-News, Herald News, Lake County News-Sun, Naperville Sun and the Post-Tribune.
