Sun-Times Media Group files for bankruptcy
Read Chairman and CEO Jeremy Halbreich's letter to readers
Sun-Times Media Group Inc., owner of the Chicago Sun-Times and many suburban newspapers, today voluntarily filed for Chapter 11 bankruptcy protection with the aim of reorganizing operations, settling a tax liability and making the company fit for a buyer.
The petition was filed with the U.S. Bankruptcy Court in Delaware. Chairman Jeremy Halbreich said the 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.
The company 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.
Unlike other newspaper owners that have filed for bankruptcy amid steep dropoffs in advertising, including Chicago-based Tribune Co., Sun-Times Media Group has no bank debt. But its IRS debt thwarted efforts to raise new capital.
Halbreich said Sun-Times will continue talks with the IRS while implementing a "strong and impressive" business plan. It also will pursue a deal with buyers and has hired Rothschild Inc., which was involved in the bankruptcy of United Airlines' owner, to field offers.
Several potential buyers have approached Halbreich since he took over Feb. 10 as chairman and interim chief executive, he said. "We're very confident that there's going to be some interest here," he said. "We intend to start that process immediately."
Chapter 11 allows vendors and employees to be paid for ongoing business activities. But vendors owed money prior to the bankruptcy filing will have to submit claims. The company has provided a link to the bankruptcy case on its Web site, thesuntimesgroup.com.
A bankruptcy judge could force the company's unions to accept wage and benefit reductions. Halbreich said he will use the proceedings to seek unspecified concessions.
Halbreich, a former executive of the Dallas Morning News, was installed as Sun-Times chairman by shareholders who engineered a board of directors takeover late last year. But by going for bankruptcy, the shareholders confront the likelihood that their stake in the company is worth nothing after an IRS accord.
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."
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. As of Nov. 7, the company had assets of $479 million and liabilities of $801 million, according to the bankruptcy filing.
Halbreich predicted that the bankruptcy will be resolved by the end of the year, speedy by the standards of such cases.
As part of the process, the company hired Huron Consulting Group as a restructuring adviser and Kirkland & Ellis as legal counsel.