Saturday, December 6, 2008

Sources: Deal in works for Avista Capital Partners, Star Tribune to part ways

A plan to cut $30 million in costs at the Star Tribune could have an added effect: getting the Minneapolis newspaper’s present owner, New York-based Avista Capital Partners, out of the picture and cutting the paper’s debt in half.

That was the word Friday from two newsroom sources with knowledge of the financial situation. The sources, who asked not to be named because they weren’t authorized to speak about the situation, said a financial consultant and bankruptcy lawyer working for the paper told union leaders that the proposed cuts would prompt senior creditors to make a debt-for-equity swap.

The creditors would buy out Avista and write down the debt they’re owed from $400 million to $200 million, thereby taking ownership of the paper, the sources said. The Star Tribune reported in October that senior creditors include Swiss financial-services company Credit Suisse.

The sources said there was some skepticism about the promise.

“You got to be skeptical because they’ve pretty much mismanaged us the whole time they’ve been here,” one source said about Avista.

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