Seattle Times puts some new land up for collateral
The block in front of Times' headquarters is now included as part of security for the company's $91 million debt to banks. Meanwhile, the paper is scaling back features, and sale of its Maine papers may slip a key deadline.
In a move that was not wholly unexpected, the financially struggling Seattle Times said Sunday, Dec. 7, that to cut expenses it plans to immediately shrink its current four daily newspaper sections to three, eliminating a number of daily features, including the New York Times crossword puzzle and daily television listings. “I am in the truth-telling business,” Executive Editor David Boardman said in a signed column in the Times. “We are making these changes because we are reducing our two biggest newsroom expenses: staff and newsprint.” The Seattle Post-Intelligencer echoed the move by also downsizing today to three sections to save on production costs.
The Seattle Times Co. is wrestling with shrinking revenues and circulation from its print paper, as are most other major urban papers. The Times Co. currently owes a consortium of banks $91 million, according to a financing agreement signed last week with Bank of New York Mellon, the consortium’s lead lender. The agreement, a deed of trust signed Dec. 1 by Times Co. president Carolyn Kelly and filed with King County, says the Times Co. owes its lenders at least $91 million and has agreed to put up three remaining parcels of its South Lake Union real estate holdings as collateral for the debt. Under the agreement, the banks will hold a lien on the land until the Times Co. debt is paid.
The Times Co. is also seeking to raise cash by cutting 150 jobs at The Seattle Times this month, selling additional real estate in South Lake Union, and selling its Blethen Maine newspaper subsidiary in Maine.
But for all its slashing and trashing the Times has not been as draconian as some, at least so far. Tribune Co., owner of The Los Angeles Times, Chicago Tribune, and other major dailies, is reportedly flirting with bankruptcy, while McClatchy — minority owner of the Seattle Times Co. — is shopping its flagship Miami Herald, without much success, according to the New York Times. Other papers are on the market in Denver, San Diego, Austin, and elsewhere. A Wall Street investment service, Fitch Ratings, is predicting some major cities will lose their print papers altogether by 2010.
The Seattle Times Co. debt includes the remainder of $230 million the company borrowed a decade ago to purchase the Blethen Maine chain, which includes the state’s largest paper, the Portland Press Herald, a website, and two smaller dailies in Augusta and Waterville. The chain has been up for sale since April and is expected to close the year with revenues off nearly $20 million from 2007. The debt also includes $24 million the Times Co. borrowed last year to settle a legal fight with Hearst, owner of the Seattle Post-Intelligencer.
The latest agreement is the fifth time the Times Co. has renegotiated its debt with its bankers since May 30 of 2006, according to the deed of trust agreement. Times spokeswoman Jill Mackie called the "refinancing" agreement “routine” and said it follows similar financial moves by “many, if not most newspapers in the country.”
Under the agreement with its lenders, the Times Co. agreed to put up a solid block of land directly south of its downtown headquarters as collateral for its loans. The land (bounded by John St., Fairview Ave. N., Denny Way and Boren Ave. N.) is mostly covered with parking lots and one small office building and is assessed on Seattle’s real estate rolls at a total of $22.8 million. The agreement says the three parcels “shall continue to secure [the Times debt] up to a maximum of $91,000,000 until all of the obligations are paid in full.” It's not known if the refinancing allows the Times Co. to increase its debt limit, or is providing more collateral for existing debt, or is in response to tighter credit-lending restrictions imposed on the bank.
The document agreement does not mention any additional collateral for the debt, and Mackie declined to disclose whether the Times Co. has pledged other items to its bankers that are not included in the latest filing. “As a private company,” she said, “we do not normally discuss specifics related to such matters.” Mackie did say the new refinancing agreement excludes two other South Lake Union parcels the Times Co. put up for sale in August. That sale, totaling nearly five acres, was expected to be finalized by the end of 2008, Steven Wood, the realtor handling the transaction for the Times Co., told Crosscut earlier this year. In a note last Friday, Wood said there was “nothing new to report” on the sale.
The Times Co.’s financial problems have also run into a new snag in Maine that could cost the company millions of dollars in extra taxes this year. The Times is seeking to sell its Blethen Maine chain to Maine Media Investment, a group headed by Wilkes-Barre, Pa., newspaper publisher Richard Connor. MMI and the Times Co. announced last month that they had signed an agreement for MMI to purchase the Blethen Maine chain. But MMI recently warned Times Co. officials it will have problems completing the due diligence required by its lender by the end of the year, according to people familiar with the negotiations in Maine.
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Comments:
Posted Mon, Dec 8, 6:30 a.m. inappropriate
Kudos to Bill Richards for his excellent work covering this complicated story. Crosscut is clearly leading the pack on this important issue. Thanks.
Posted Mon, Dec 8, 8:06 a.m. inappropriate
The impact of this story hit my doorstep this morning when I opened my thin revamped Seattle Times. And, the thinner the paper becomes, the less likely I am to continue my subscription. Clearly the leadership of the paper lives in a bunker. While their business section shrinks and merges with section A writers like John Cook and Todd Bishop launch TechFlash (www.techflash.com)to rave reviews and significant page views. In the years that come, I will wrap our fish?
Posted Mon, Dec 8, 8:19 a.m. inappropriate
Bill,
Why don't you EVER write about Hearst and the P-I, which is losing at least as much as the Times?
Posted Mon, Dec 8, 9:16 a.m. inappropriate
Excuse the typo. "In the years that come, how will we wrap our fish?
Posted Mon, Dec 8, 10:43 a.m. inappropriate
Tony,
The PI picked up $24 million from the Times last year when the Times was forced to settle their ill-advised attempt to shut down the PI. That money will carry the PI for a few years as they watch the Times crater. The PI has much lower overhead than the Times so who knows if it is unprofitable.
Posted Mon, Dec 8, 12:06 p.m. inappropriate
Rat City,
You obviously don't understand the way the JOA works. Both companies are losing money on the deal. And the P-I reduced their paper to three sections today, too. Their circulation is barely above 100K now.
Posted Mon, Dec 8, 12:43 p.m. inappropriate
This looks similar to what happened in San Francisco, where Hearst waited until the time was ripe to buy out the Chronicle, something the DeYounge family vowed never would happen. I always thought the best paper around here would be the Times A section, followed by the P-I's everything else. The Times feature writing style is unbearablely chatty, filled with first person references and painful colloquialisms. Maybe this kind of outcome won't necessarily be bad.
Posted Mon, Dec 8, 12:59 p.m. inappropriate
There isn't really room in metro Seattle for two papers "of record." The Seattle Times is too bland and too right of center editorially to appeal to Seattle readers much, and it doesn't cover the East Side that well to appeal to Eastsiders much, so I'm not sure who its target audience and paying customers are supposed to be. The PI is more politically in tune with Seattle, despite its low subscription numbers, but it's getting its JOA subsidy so we don't know how profitable it would be on its own.
If the PI went under, I would cancel any substitute subscription to the Seattle Times instead. Otherwise, if I had to pick just one Seattle paper to read each week, frankly I'd pick The Stranger. It's more entertaining while being informative, and it doesn't shy away from taboo topics or fail to admit or see bias in its stories. Its election and local political coverage is second to none, and its endorsements are usually well thought out AND entertaining to read.
I get more local news from blogs these days: why don't the PI and Times understand how to use and leverage blogging yet?
Posted Mon, Dec 8, 1:26 p.m. inappropriate
I am somewhat confused. Is this $91 million a new loan, or an existing loan that has been refinanced with the additonal collateral of the properties? Any indication of the interest rate on this debt, or if it is higher or lower than the previous rate? Is the loan only on the Seattle Times, or against all the Blethen properties? The reason I am asking these questions is to figure out if Blethen's debt problems have worsened with this deal, or improved.
As for Maine, an early part of the Conner-Cohen deal involved an ESOP using the pension plan. But with the bankruptcy filing of the Tribune, we now see the threat to employee pension plans when ESOPs fail. United Airlines employees lost two thirds of their pension plan under that ESOPs failure.
Posted Mon, Dec 8, 3:06 p.m. inappropriate
Edward--It is another refinancing, according to the Times. What is new about this document is that it nails down the current Times Co. debt to at least $91 m.--there is a reference within the deed to "other Loan Documents to which (the Times Co.) is a party", but no further explanation. I have no idea whether the interest rate is up or down, though that certainly would be helpful in decoding the Times' finances. We are also glimpsing more erosion of the Times Co. asset base, which must be like water torture for the Blethens. The Maine negotiations do not include any cash from the union pension--unlike Zell's ESOP deal with Tribune Co.
Richards
Posted Mon, Dec 8, 10:11 p.m. inappropriate
Here's another question for the author. Is the Times Co. able to bankrupt its Maine operations without bankrupting the Seattle branch of the company.
I don't see how the group wanting to buy the Maine newspapers will receive its financing in these economic times. If that deal fall through, I would not be surprised to see the company to file a Chapter 11 "reorganization" bankruptcy that would allow it to restructure its debt and get out from under some of its union contracts and pension obligations.
(That's precisely what Sam Zell did today with his Tribune Media company, which owns the LA and the Chicago newspapers.)
I wonder if it is profitable or wise for the Blethens to try to limit such a bankruptcy to the Maine properties?
BTW, hasn't the purchase of those newspapers for that price ($230 million plus) turned out to be an extremely dumb strategic move for the Blethens?
Posted Mon, Dec 15, 8:43 p.m. inappropriate
OK, at least make the ads black and white, so the reading isn't so distracted. Advertisers, you're forcing your own expenses to be wasted because you're not testing what works.
Being able to respond to articles is nice. Will we still want to do it in 5 years, 7 years, 10 years? I don't know. There is far too much clutter all around me.
I feel the need to lay on the sofa with my crinkly paper paper.
Posted Mon, Dec 15, 8:45 p.m. inappropriate
PS I still want an afternoon/evening newspaper delivered to my front doorstep. Make it happen and I will pay more. Let me sit in my comfy chair, with my drink at hand, quietly for a half hour when I return home, reading my paper.
It's not old-fashioned. It's what I miss the most at the end of my day.