CHICAGO — A hometown investor has offered the unions at the Chicago Sun-Times a take-it-or-leave-it proposal to buy the company in bankruptcy court, and the unions just might leave it — snuffing out what could be the best hope for survival of the city's oldest continuously published daily.
There's no line of eager buyers at the Sun-Times' door. And it seems unlikely parent company Sun-Times Media Group could do much to woo other investors in an era of free Internet news that has already seen the demise of other second newspapers in two-newspaper towns such as Seattle and Denver.
Businessman Jim Tyree's bid for the Sun-Times Media Group "seems to be the only game in town," said Michael Miner, a former Sun-Times staffer who covers local journalism for the Chicago Reader, a free weekly. If Tyree walks away, a Sun-Times lawyer has said, the company would have to consider liquidation.
Tyree, who grew up on Chicago's South Side and now heads Mesirow Financial, a financial services firm, leads a group that has offered to pay just $5 million in cash for the assets of the Sun-Times' parent company, which also runs more than 50 suburban publications. The investors also would assume about $22 million in liabilities to keep operating the company.
First, however, Tyree wants Sun-Times unions to agree to lock in 15 percent pay cuts that were originally intended to be temporary, among other concessions. Five Sun-Times unions have rejected the concessions, four have accepted them and seven have not yet voted, Sun-Times spokeswoman Tammy Chase said.
"The business is in trouble, it needs to transform itself . . . therefore the concessions are essential for it to survive," Tyree said in an interview.
Tyree also wants members of the Chicago Newspaper Guild to agree to flexible work rules. That proposal "guts our contract," complained Tom Thibeault, executive director of the Guild, which represents editorial workers at the Sun-Times newspapers. "We hold on to the front cover and the back cover — and everything else goes out the door."
A judge last week rejected Tyree's efforts to set Tuesday as a deadline for the unions to agree to the demands, suggesting that the parties should have until December to seal any agreement. But both Tyree and Sun-Times Media Group executives warn it's still a matter of weeks before time for a deal runs out.
The company doesn't have the cash to hold out until December, and each day without an agreement brings it closer to shutting down, jeopardizing more than 1,800 jobs, Jeremy Halbreich, the company's chairman, told employees in a recent memo.
"I know that it's as hard for each one of you to accept this fact as it is for me to put it in writing. But, it's true," he wrote.
Scott Cargill, an attorney for a committee of lower-tier, unsecured creditors, said Wednesday that the parties still were reviewing the sales terms. He said the creditors were concerned about the ongoing disputes derailing the company's future, "but it's really the company and the unions that are the parties at the negotiating table."
A message left with the company's chief creditor, Fifth Third Bank, was not returned.
The company's stockholders are already wiped out — Sun-Times shares trade for a fraction of a penny. At its peak in 2004, the company, then known as Hollinger International, had a market value of nearly $1.9 billion.
If the Sun-Times goes under, that would leave this city of 3 million with just one major daily, the Chicago Tribune, whose parent company is also operating under bankruptcy protection.
The Sun-Times has its roots in the Chicago Evening Journal, founded in 1844, though the present newspaper came about in 1948. That was when Marshall Field III, whose grandfather founded the Marshall Field's department store, combined his broadsheet Chicago Sun with the Chicago Times. Over the years the newspaper has been home to writers who gained national acclaim, including columnist Mike Royko, advice guru Ann Landers and movie critic Roger Ebert, who still writes for the Sun-Times.
The tabloid also played key roles in exposing corruption. In 1977, the Sun-Times went so far as to buy a bar to document how city inspectors demanded bribes.
Some analysts and former Sun-Times journalists trace some of the newspaper's financial problems to former owner Rupert Murdoch, whose News Corp. acquired it in 1984 and reversed its traditional liberal editorial stance, losing many top writers.
In 1993, Murdoch sold the Sun-Times to Hollinger, whose then-chief executive, Lord Conrad Black, was convicted in 2007 of siphoning millions of dollars from the Sun-Times and its other newspaper holdings.
For a while under Hollinger, the Sun-Times had a 10 percent to 12 percent operating profit margin, better than No. 2 newspapers in most cities. Hollinger's biggest move was to create the Sun-Times Media Group by buying up suburban and neighborhood newspapers. Some of those are profitable, and some analysts have envisioned the Sun-Times company shutting down the namesake newspaper and keeping the suburban ones.
Tyree, 51, is a lifelong Chicagoan who grew up in a working-class neighborhood. His father managed a gas station and his mother sold lingerie. Now he's chairman and chief executive of Mesirow, which had nearly $31 billion in assets under management as of June 30.
He dismisses the suggestion, widely circulated, that he's interested in the Sun-Times for sentimental reasons.
"It's absolutely a business objective — to make profits," he said. "But we aren't planning on making profits for quite some time because the paper has to be turned around, its Web sites have to be turned around. A significant amount of capital expenditures need to be made to do that, and a significant amount of restructuring."
Sun-Times Media filed for Chapter 11 bankruptcy protection in March, citing $479 million in assets and $801 million in debt.
One problem is simply falling ad revenue, which has plagued many newspapers. For the six months ending March 31, average daily circulation at the Sun-Times remained flat from a year before at 312,000. Ten years ago, average daily circulation was around 470,000.
But the Sun-Times also owes as much as $608 million in back taxes and penalties related to Black's financial dealings. According to court documents, back taxes would remain with the old company following the asset sale to Tyree's investment group. The Internal Revenue Service sometimes has priority over other creditors, but it still could wind up with just pennies on the dollar.
Tyree said that if he does take over the Sun-Times, he doesn't foresee additional job cuts — beyond the more than 400 jobs already shed since late last year through layoffs and attrition. He said money would be spent on improving content, but he declined to provide details.
Given the low price for the company, Edward Atorino, a media analyst with Benchmark Co., doesn't rule out that sentimental factors or hunger for influence could lead other investors to step forward later, even if the Tyree deal collapses.
"If you're a real rich guy and you bought the Sun-Times and could subsidize it forever, you'd get a voice in Chicago," Atorino said. "You can yell at the governor, you can yell at the president. And if you're very rich and it costs you a few million bucks, who cares?"
Potential bidders have until Monday afternoon to submit any competing purchase proposals. If there are any, an auction would take place in Chicago next Wednesday.
AP Business Writer Anick Jesdanun in New York contributed to this report.
Monday, October 5, 2009
Unions Hold The Future Of The Chicago Sun-Times In Their Hands
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