Newspaper Bankruptcy Watch

Chicago Sun-Times files Chapter 11:

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.

And USA Today’s free newspaper giveaway strategy isn’t working out so well these days.

USA Today President and Publisher Craig Moon retired abruptly yesterday and said the nation’s biggest newspaper lost 100,000 subscribers from the slowdown in travel. A decline in hotel occupancy means fewer people are there to collect free newspapers.

USA Today gives away 1.3 million daily copies in hotels, which accounts for more than half the newspaper’s 2.3 million total circulation. These giveaway copies are booked as paid circulation. This is obviously a sham but it’s technically considered circulation under newspaper circulation rules.

Here’s the rule from the Audit Bureau of Circulations governing newspaper bulk circulation:

All copies purchased by hotels, restaurants, airlines and rental car agencies for free distribution to their guests and by sponsors for free distribution to hospital patients and nursing home residents, regardless of the number of copies, will be reported as Third-Party Sales when at least 25 percent of the basic price is paid, either in cash or by applicable barter.

Nice quarter, guys

“Congratulations on a fabulous quarter,” Christine Chen of Needham & Co. on Urban Outfitters Q4 2008

“Alright guys, thanks for taking my question and congratulations on getting the term financing on the CDO facility,” Matthew Howlett of Fix-Pitt Kelton on Newcastle Investment Corp. Q4 2008

“Hi, good evening. Congratulations on another great quarter here,” Brendan Strong of Barclays Capital on Genoptix Q4 2008

“Nice quarter guys, kind of back up at high altitude again, Bill,” Jay Meier of Felti & Co. on Entrust Q4 2008

“Yes, congratulation everyone on another fantastic quarter,” Jeffrey Klinefelter of Piper Jaffray on Guess Inc. Q2 2008

“Nice quarter guys, thanks for the color,” John Barnes of BB&T Capital Markets on FedEx Q2 2008

“Nice quarter, guys — really a nice job,” Vincent Colicchio of Noble Financial on Micros Systems Q2 2008

“Congratulations, Norm, a very nice quarter on you and your entire staff,” Frank Magdlen of The Robins Group on AAON Inc, Q2 2008

“Congratulations on a nice quarter, guys, and thanks for taking my questions,” Nat Kellogg, Next Generation Equity Research on Olympic Steel Inc. Q1 2008

“Hey, congrats on an awesome quarter guys,” Brett Levy of Jeffries & Co. on GrafTech International Q1 2008

“Hi guys, nice quarter!” Tim Nelson of Piper Jaffray on Zoll Medical Q4 2007

“Hi, good afternoon. Congratulations on a nice quarter and a nice year,” Quintin Lai of Robert W. Baird on Invitrogen Corp. Q4 2007

“Very nice quarter guys, very nice,” Rodney Ratliff of Stanford Group Co. on Equinix Q2 2007

“Nice quarter guys,” Adam Frisch of UBS on Accenture Q1 2007

“Congratulations on the great results,” Margaret Major of Goldman Sachs on Coach Q1 2007

“Nice quarter guys,” Matt Doland of Becker Capital on Lifecell Q4 2006

“Once again great quarter guys, congratulations,” Anthony Stoss of Craig-Hallum Capital Group on SRS Labs Q3 2006

“Congratulations on the exceptional numbers,” Alexei Yakovitksy of Deutsche Bank on Mobile TeleSystems Q3 2006

“Congratulations for the nice quarter and nice guidance,” Kaushik Roy of Susquehanna International Group on Brocade Q4 2005

“Nice quarter guys,” David Steinberg of Deutsche Banc on Sepcracor Q4 2005

“Well thanks very much and congratulations on a remarkable quarter,” Richard Jaffe of Steifel Nicholas on Coldwater Creek Q4 2005

“Hi thanks, first I would say congratulations to everybody, its (a) really terrific quarter,” John Morris of Harris Nesbitt Gerard on Abercrombie & Fitch Q4 2005.

“Hi guys, great quarter,” Adam Holt of JP Morgan on Citrix Q3 2005

“I’m not sure any one said nice quarter yet, guys but maybe that is becoming a little bit routine to you,” John Roberts of Buckingham Research on Corning Q3 2005

Thanks to Seeking Alpha’s transcript search engine.

Newspaper Bankruptcy Watch: The San Diego Union-Tribune

A lot’s been said about last week’s buyout of The San Diego Union-Tribune by Platinum Equity, a private equity firm, which disclosed only the barest details about the sale.

The sale isn’t about newspapers. Rather, it’s about land.

Platinum Equity is not in the newspaper business; it’s in the distressed assets business. From an accounting perspective, land is the only asset that never loses value. The Union-Tribune owns 13 prime acres in Mission Valley that’s sandwiched between the Town & Country Resort and the ritzy Fashion Valley Mall. The company also has half an acre in La Jolla.

If reports that the newspaper company sold for less than $50 million are correct, Platinum Equity is getting the company land at a tremendous discount in a depressed market. All it has to do is hang on for a few years until the market recovers and then it has prime property for an apartment tower, corporate offices, hotel or mall expansion.

What to do with the newspaper then?  Few people paid much attention to the last sentence in the press release announcing the sale:

Platinum Equity was advised by Hughes Hubbard & Reed and Alvarez & Marsal’s Transaction Advisory Group.

Alvarez & Marsal is overseeing the dismantling of Lehman Brothers. The bankrupt Tribune Company also hired Alvarez & Marsal to craft a restructuring plan.

Last year, Fortune magazine described Alvarez & Marsal as a firm that profits from corporate misery:

Alvarez & Marsal do the mopping up when a company has run out of options and can’t meet its loan obligations. With some clients, A&M dispatches teams to work much like consultants – looking over the books and talking ideas – but about a hundred times faster. In thornier cases the firm does the dirty work itself, usually with Tony Alvarez, Bryan Marsal, or another partner stepping in as CRO – chief restructuring officer – and doing triage like ordering layoffs, selling off assets, and making overhead cuts.

It seems then that Platinum Equity is going to make the kind of moves that the Union-Tribune’s family owners never could. Sadly, that is going to mean the end of San Diego’s biggest newspaper.

Trent Reznor, Economist

The ticketing marketplace for rock concerts shows a real lack of sophistication, meaning this: the true market value of some tickets for some concerts is much higher than what the act wants to be perceived as charging.

For example, there are some people who would be willing to pay $1,000 and up to be in the best seats for various shows, but MOST acts in the rock / pop world don’t want to come off as greedy pricks asking that much, even though the market says its value is that high. The acts know this, the venue knows this, the promoters know this, the ticketing company knows this and the scalpers really know this.

So…The venue, the promoter, the ticketing agency and often the artist camp (artist, management and agent) take tickets from the pool of available seats and feed them directly to the re-seller (which from this point on will be referred to by their true name: SCALPER).

I am not saying every one of the above entities all do this, nor am I saying they do it for all shows but this is a very common practice that happens more often than not. There is money to be made and they feel they should participate in it. There are a number of scams they employ to pull this off which is beyond the scope of this note.

More here

Meredith Whitney: "The worst is ahead of us"

Meredith Whitney became one of the most feared analysts on Wall Street in 2007 when she advised her clients at Oppenheimer & Co. to sell Citigroup. Last night, Charlie Rose asked her what she thinks lies ahead:

CHARLIE ROSE:  Listen, you saw this early certainly in terms of the banks, and you got a lot of credit for that.  Have we not seen the worst?  Is the worst still to come, or have we passed some point of beginning to understand and just waiting for the plan to get us back on track?

MEREDITH WHITNEY:  I really believe the longer we wait, the longer we head down this path — well, the math is the worst is ahead of us.  And…

CHARLIE ROSE:  So the end of 2009 or beyond?

MEREDITH WHITNEY:  At least the end of 2009.  Look, you have credit continuing being pulled from the system, and until it stabilizes, there is nowhere to go but down.  And from an unemployment perspective, no one is pricing in low, mid teens unemployment in any of their assumptions.  So it
is just a question of not if the banks need to raise capital, it’s when, and, you know, let’s get some capital back in the system by looking at who can provide it, like the local banks.  We will go back to a time that was and not try to preserve a system that is and — or was more recently and will never be again.