Mar 31, 2009 5:29 pm US/Central
Sun-Times Files For Bankruptcy
Rival Tribune Company Has Been In Chapter 11 Since December 2008
CHICAGO (CBS) ―
This was a dark day at the Chicago Sun-Times. The Sun-Times Media Group, owner of the Chicago Sun-Times and numerous suburban newspapers, filed for Chapter 11 bankruptcy Friday morning, just a few months after rival newspaper titan Tribune Company did the same thing.
It's been only two days since the price of the Sun-Times went from 50 to 75 cents, but it's clear the newspaper needs every quarter it can get.
Even though its circulation puts it in the top 20 nationwide, ad sales are down dramatically and as CBS 2's Mike Parker reports, there are fears the tabloid is about to fold.
As CBS 2's Joanie Lum reports, the filing didn't come as a surprise for many employees at the paper. The only surprise was that the Sun-Times filed for bankruptcy after the Tribune.
On Tuesday morning, the staff of the Sun-Times met in a meeting with the bosses in the Holiday Inn located above their headquarters at 354 N. Orleans St., to learn how bankruptcy protection will affect the newspaper and its readers.
In a letter to readers, Chief Executive Officer Jeremy Halbreich emphasized that the paper is not going out of business. The news, features and sports will continue to be delivered, he wrote.
But the bankruptcy is bad news for employees.
In a separate letter to Sun-Times employees that was published on the Tribune's Web site, Halbreich wrote that employees would no longer receive severance or COBRA benefits when to staff whose jobs are terminated.
"Former employees who wish to receive COBRA medical benefits must pay the full insurance premium costs and administrative costs required by COBRA," the letter said.
The Sun-Times is also requiring all non-union employees, including top managers, to take one week of unpaid leave in April or May, the letter said. The company "will seek similar sacrifices" from unionized staff, the letter said.
Those points were all reiterated in the staff meeting.
The Sun-Times retained Rothschild Inc. to help with a possible sale of assets.
Halbreich said in a statement that filing for Chapter 11 protection offers the best opportunity to protect the company's media properties for the long-term.
He said in the Sun-Times that filing was a difficult decision but essential for the company "to re-establish itself as a self-sustaining, profitable operation. That is worth fighting for."
His overriding goals are to sustain the company's print and online news operations while "preserving as many jobs as possible," he said.
On its website, the newspaper is pledging to reorganize, seek new investors, and continue publishing Sun-Times, the Southtown Star and a handful of suburban papers.
Bill Zwecker writes his daily column for the Sun-Times, sometimes from his desk at CBS 2, where he is also an entertainment reporter. He says the words "bankruptcy protection" sting.
"It's not a surprise," Zwecker said. "The Sun-Times has been hemorrhaging money like so many news organizations have been in this economic climate for a long time, plus we have so many added problems with Conrad Black and theft."
Controlling owner Conrad Black pillaged the company, which is now burdened with a $608 million debt in taxes and penalties.
Black is now serving a 6 1/2-year sentence in federal prison, after being convicted in July 2007 of siphoning off millions of dollars belonging to the Sun-Times parent company, then known as Hollinger International, when he was chief executive officer of the company. Hollinger also owned the Daily Telegraph of London, the Jerusalem Post and hundreds of community papers across this country and Canada.
But even though Black went to prison, newspaper employees are paying the price.
"These things usually lead to renegotiations of salaries and benefits," Zwecker said. "It's very, very sad, and very hard to have to deal with this. But hopefully, we'll get through it, and we've got a lot of great people that work for the paper, and hopefully, we'll survive."
At the last major staff meeting about a month ago, then-Editor-in-Chief Michael Cooke predicted the bankruptcy, then left for a job out of town.
Asked if there will be anything left for shareholders after bankruptcy, Halbreich said, "You never want to say never and you never know because we haven't solicited offers yet, but realistically, probably not."
The company reported that it has one significant creditor -- the Internal Revenue Service. The IRS has said Sun-Times Media Group owes up to $608 million in back taxes and penalties from past business practices by its former controlling owner, Conrad Black, now imprisoned for theft from corporate coffers.
Sun-Times Media Group shares are traded on the Pink Sheets and closed Monday worth just a nickel each. That means that based on the stock, the entire company is worth about $4 million.
Halbreich predicted that the bankruptcy will be resolved by the end of the year, speedy by the standards of such cases.
The paper was formed in 1948 by the merger of the Chicago Sun and the Chicago Daily Times, although it traces its history back to the founding of the Times' predecessor, the Chicago Evening Journal, in 1844.
It Sun-Times was owned by the Marshall Field family until 1983, when it was purchased by Rupert Murdoch's News Corp, a buyout that made
legendary columnist Mike Royko so angry that he jumped to the rival Tribune.
Murdoch sold the paper a few years later because of cross-ownership restrictions when he bought TV station WFLD to help start the Fox TV network. Hollinger later bought the Sun-Times. A group of private investors owned the paper until Hollinger bought it in 1994.
The Tribune Company, filed for Chapter 11 bankruptcy in December 2008.
Other media companies with Chicago interests have also had trouble. Creative Loafing, parent company of the Chicago Reader weekly alternative paper, filed for Chapter 11 bankruptcy in September 2008.
The Minneapolis Star-Tribune has also filed for bankruptcy, as has the parent company of the Philadelphia Inquirer and Daily News, and the Journal Register Company, which owns the New Haven Register and several other papers in Connecticut, Pennsylvania, New Jersey, upstate New York, Ohio and Michigan.
Some newspapers have gone out of business completely or switched to Web-only formats in recent months. The Rocky Mountain News in Denver posted its last edition on Feb. 27, while the Seattle Post-Intelligencer went all online earlier this month.
Michael Smith, who teaches Media Management at Northwestern University, said, "What this means is that they are placing a bet on the future. They're ready to restructure for the future. If they didn't think that they had a future, they'd probably just cash in their chips."
"What you'll hear is that a diminished work force means diminished journalism. And I don't have any evidence to the contrary," added Smith.
Fear not, the Sun-Times will be at your doorstep or on the newsstand again tomorrow, but who can predict the size of the reporting staff? If the ad revenues continue to fall, will the paper keep shrinking?
CBS 2's Joanie Lum, the Associated Press and the STNG Wire contributed to this report.
(© MMX, CBS Broadcasting Inc. All Rights Reserved.)
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