For the Seattle Times, relief is not spelled M-A-I-N-E
When the Seattle Times Co. announced June 15 that it had sold its Blethen Maine subsidiary to an investment group, Maine Today Media, Carolyn Kelly, the Times president and chief operating officer, quickly noted in a staff memo that the sale, while welcome, 'êdoes not solve the financial challenges we face.'ê
Details of the sale were not announced. Times Co. officials were anxious to keep the extent of those challenges out of the press, according to Maine union officials who took part in the sale negotiations. The Times even refused to allow the buyer, Maine Today Media Inc., to tell its junior partner, the Portland Newspaper Guild, how much it was paying for Blethen Maine. The unions will get three seats on Maine Today Media'ês board for backing the deal.
In interviews with Crosscut, three persons directly involved in portions of the Blethen Maine negotiations pegged the sale price at between $30 million and $40 million. That would mean Maine Today Media paid a small premium above the Blethen Maine chain'ês appraised real estate value for a business that includes state'ês largest newspaper, the Portland Press Herald, plus two smaller dailies in Augusta and Waterville, and a news website.
For the Times Co., the sale represents a stunning loss. In November of 1998, the Times borrowed $233 million to buy the Maine chain. The company disclosed the loan figure in a Power Point presentation the company'ês chief financial officer, Mae Numata, gave to the Times Co.'ês bankers in April of 2002. The presentation was included in documents filed in the joint operating agreement lawsuit between Hearst Corp., owner of the Seattle Post-Intelligencer, and the Times. Hearst and the Times settled their legal dispute in 2006 with the Times paying the P-I's owner $24 million to end the lawsuit. Hearst shut down the print P-I and terminated the JOA last March. The P-I currently appears only in an online edition, SeattlePI.com. The current Times Co. debt has been reported to be at least $91 million, prior to any reduction of the debt presumably made possible by the sale of the Maine papers.
While the Maine debt has seriously hurt the Times' finances, especially following the newspaper industry'ês recent collapse, the financial fallout from Blethen Maine could make things even worse. An undisclosed piece of the transaction could wipe out even the modest amount the Times Co. received for the Maine newspapers and leaves the Times responsible for making up a multi-million-dollar shortfall in the pensions of hundreds of Blethen Maine employees.
During the pre-sale negotiations, Maine Today Media officials insisted that one of Blethen Maine's major liabilities'êits underfunded pension plan — remain on the Times books rather than being absorbed by the chain's new owners. In 2007, the Times Co. merged the Blethen Maine pension trust, which covered the chain'ês union and non-union employees, with a separate pension trust covering employees at the Times'ê Walla Walla newspaper, the Union-Bulletin. The Times engineered the merger, according to union officials who signed off on the arrangement, because the Maine trust was underfunded and needed access to cash from Walla Walla'ês healthier pension plan.
Richard Connor, who headed Maine Today Media's negotiating team and who is now editor and publisher of the Portland Press Herald, made the Times Co.'s retention of the Blethen Maine pension obligation a deal-breaking requirement. Connor, a Maine native who is also publisher of the Wilkes-Barre (Pa.) Times Leader, led the Blethen Maine acquisition with the Dallas investment firm HM Capital Partners. The extent of the Times' pension fund obligation remains unclear since the privately held Times does not disclose details of its internal finances. Union officials in Maine say that it certainly would run into the millions of dollars.
What is known is that the Times Co. currently has some $40 million in unfunded pension liabilities for its merged pension plans, which include the Blethen Maine plan. According to documents filed by the pension plan, the Times Co.'s merged pension plan assets stood at $175.7 million and were slightly overfunded at the end of 2007. However, when the stock market plunged late last year, the merged pension fund took a major hit, resulting in a drop of more than $40 million in the valuation of its assets. The plan'ês most recent filings show the Times Co.'ês merged pensions are now about 23 percent underfunded, a liability that must be made up by the end of 2011 under the federal Pension Protection Act.
The Times, of course, is not the only company on the hook for substantial pension liabilities. The Big Three auto companies, for examples, owe tens of billions of dollars in unfunded pension liabilities. And some analysts have estimated the Boston Globe, which may be sold by its owner, the New York Times Co., may be carrying as much as $100 million in unfunded liabilities such as pensions. But for a struggling smaller concern like the Seattle Times Co. even a few million in leftover Blethen Maine pension liability adds another hurdle to financial stability.
Another lingering question concerns the real estate. Maine Today Media announced just three days after the Blethen Maine sale that it had lined up a buyer for the chain'ês most valuable real estate — the Press Herald'ês downtown Portland headquarters, its former printing plant, and part of a downtown parking garage. Would the Times have done better simply flipping Blethen Maine'ês real estate itself last year while the market was still hot? Instead, the company spent nearly a year sparring with Maine Today Media over details of a deal whose assets were shrinking daily.
Times Co. officials did not respond to Crosscut'ês request for comment for this article. The day after the Blethen Maine sale the Seattle Times quoted Times spokeswoman Jill Mackie, who said, "Strategically, Maine was a very important acquisition for us, and the newspapers provided a very good return during our 10-year tenure. We were very reluctant to sell and are very sad about it. If it were not for the severe recession, we would not have done so."
Perhaps. But Times officials may have other good reasons to be sad about the outcome of their Maine misadventure. Blethen Maine could turn out to be the gift that keeps on hurting.