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.
Times Co. officials set the end of 2008 as a deadline for the deal in order, insiders say, to give the company a chance to use the tax loss from the Blethen Maine sale — which could amount to as much as $200 million — to offset taxable gains from the sale this year of the two South Lake Union properties in Seattle. If MMI fails to meet the deadline, people familiar with the negotiations told Crosscut, the Times Co. could be on the hook for millions of dollars in additional taxes for the Seattle property sale.
Times Co. officials have declined to discuss details of the Maine sale and Connor could not be reached immediately for comment.
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