Sun-Times Media Files Chapter 11
As Originally Posted at the Wall Street Journal

The cash-strapped publisher of the Chicago Sun-Times on Tuesday filed for protection from creditors and said it may seek to sell "substantially all" of its assets, becoming the fifth newspaper company since December to tip into Chapter 11.

Sun-Times Media Group Inc. faces a crushing tax claim stemming from the former ownership of press baron Conrad Black. Its bankruptcy-court filing values its assets at less than the $510 million claim, which won't be wiped out in the proceedings. But with Sun-Times in Chapter 11, the tax claim won't carry over to potential new owners, a factor that was a primary motivation for the bankruptcy filing, said Jeremy L. Halbreich, chairman and interim chief executive.

Sun-Times follows Tribune Co., the Star Tribune in Minneapolis, the parent company of the two Philadelphia dailies and Journal Register Co. into bankruptcy court.

In addition to the Chicago Sun-Times, the 17th-largest newspaper in the country, Sun-Times publishes dozens of smaller daily and weekly papers in the Chicago suburbs.

Both of Chicago's major dailies are now operating under bankruptcy-law protection. Chicago Tribune publisher Tribune Co. filed in December. The Tribune has an average weekday circulation of 516,000 copies, compared to more than 313,000 copies for the Chicago Sun-Times.

Unlike the other newspaper companies in Chapter 11, Sun-Times isn't burdened with debt. Its problem is operating losses for each of the past six years, including a $344 million loss in 2008.

Sun-Times said it is "at risk of running out of cash quickly" unless it receives relief from its obligations. As of Sept. 30, Sun-Times had less than $100 million in cash and cash equivalents, according to regulatory filings.

The company hired investment bank Rothschild Inc. to help it sell assets, but it isn't clear how many potential buyers will emerge.

Sun-Times canceled an auction of the company last year when it found few takers. Mr. Halbreich said suitors in the prior auction were wary of investing in Sun-Times while the Internal Revenue Service claim hung over its head.

Sun-Times blamed its weakened financial condition in part on legacy issues related to Mr. Black, the Canadian businessman who controlled the company then known as Hollinger International Inc. Mr. Black and other executives were convicted in 2007 for their role in bilking the company out of millions of dollars.

Mr. Black, now in federal prison in Florida, is listed as a creditor in Sun-Times's Chapter 11 case, as the company has advanced legal fees and expenses to Mr. Black related to pending civil lawsuits. Alex Bourelly, an attorney at Baker Botts representing Mr. Black, declined to comment on how those claims are likely to be treated in bankruptcy court. The company has paid out about $118 million in connection with legal fees and costs for Mr. Black and other former company officers and directors.

Sun-Times said it expects its advertising revenue to decline roughly 30% throughout 2009. That follows an 18% drop in print ad revenue during last year's fourth quarter.

The Sun-Times bankruptcy-court documents list assets valued at $479 million as of Nov. 7, 2008, and $801 million in debts.