The Sun-Times Media Group, parent of the Chicago Sun-Times, filed for bankruptcy protection on Tuesday, earning Chicago the distinction of being the first U.S. city served by two bankrupt newspaper publishers.
The Sun-Times also said it hired Rothschild Inc to try to sell some of its assets, which include 59 newspapers and their websites. The Sun-Times is one of the papers that it could sell, spokeswoman Tammy Chase said.
Interim Chief Executive Jeremy Halbreich told the Sun-Times that the company has received interest from several potential buyers. He was not immediately available for comment.
The Sun-Times filed for Chapter 11 bankruptcy protection at the U.S. Bankruptcy Court in Delaware.
It plans to operate its newspapers and websites while improving its cost structure and stabilizing operations. It said it has financial resources to continue daily operations.
Unfortunately, this deteriorating economic climate, coupled with a significant, pending IRS tax liability dating back to previous management, has led us to today's difficult action, Halbreich said.
The publisher joins its much larger, Chicago-based rival, Tribune Co, in a growing list of newspaper companies that are choosing bankruptcy as the best way to restructure as advertising revenue plummets.
The Sun-Times, unlike Tribune and some U.S. newspaper publishers, is not facing an overwhelming debt load.
Instead, the Internal Revenue service has said the company owes up to $608 million in back taxes and penalties, dating back to when it was Hollinger International, controlled by now-imprisoned media baron Conrad Black.
The Sun-Times plans to complete the bankruptcy process this year. It hired Huron Consulting Group as its restructuring adviser and Kirkland & Ellis as legal adviser.
Sun-Times properties include the Beacon News in Aurora, the Courier-News in Elgin, the Lake County News-Sun in Waukegan and the Herald News in Joliet. All are in Illinois. It also owns the Post-Tribune in Merrillville, Indiana.
Tribune Co, which publishes the Chicago Tribune, and the Sun-Times are two members of a growing club of newspaper owners in bankruptcy as the recession crimps ad spending. Other members include Journal Register Co and the owner of The Philadelphia Inquirer and Philadelphia Daily News.
Other publishers, including McClatchy Co and The New York Times Co, have seen their stock prices plunge as they cut back staff and Wall Street sees little hope for the ad market recovering.
Hearst Corp and EW Scripps Co, have shut failing papers rather than rehabilitating them.
The Sun-Times had been working with Lazard Freres & Co since 2008 on its options, but no longer is, Chase said.
Earlier this year, the company deposed board members and management, including former CEO Cyrus Freidheim, at the urging of major shareholder Davidson Kempner Capital Management LLC.
(Reporting by Robert MacMillan; Editing by Derek Caney)