Miami Herald Owner in Danger of Bankruptcy

Layoffs, partnerships, and the Net conspire to kill South Florida's dailies.

"We just had record traffic last month, and this month is going to surpass that," Gyllenhaal says. "The website is being updated every few minutes; every story is going up. We're still in the middle of that transition obviously, but it's going better than we could have hoped for."

Of course, it's part of Gyllenhaal's job to be positive about the state of affairs at his newspaper. But the journalists working at the three aren't so positive, especially after the purging of so many of their colleagues.

They wonder if the consolidation happening at the three papers might be a trend meant to pave the way for more layoffs.

"They should just combine all the newspapers into one and call it the South Florida Post," one Post reporter remarks, at least half-seriously. "Make it a one-section tabloid for all three counties."

While such an idea might seem far-fetched, it's not inconceivable that a new owner could wind up taking over at least two of the publications. All are owned, after all, by companies in dire economic trouble that have already sold assets, including a couple of newspapers, to pay off debt.

The Herald, for instance, is owned by McClatchy Co., which bought the Miami newspaper's former parent, Knight Ridder, right at the top of the real estate and credit bubble in 2006. The company's stock hit an all-time high the year before the highly leveraged purchase around $75 a share. Today the company is $2 billion in debt and trading below three bucks.

The company has struck a deal to sell 10 acres of waterfront land next to 1 Herald Plaza for $190 million to help pay down its debt. But even that deal isn't safe in the deteriorating economy. McClatchy CEO Gary Pruitt said last week during an earnings call that he can't guarantee the deal will close.

The Sentinel's parent, Tribune Co., might be in worse shape. It recently took a $3.8 billion write-down on its assets. Analysts at Fitch cut the rating on Tribune Co.'s $13.4 billion in debt, citing an "acceleration of declines in newspaper advertising revenue and cash flow at Tribune and no evidence from any participants in the industry regarding the prospects for current pressure relenting."

As for Cox Newspaper Inc., the owner of the Post, its rather drastic cost-cutting measures also indicate a company in a fight for its survival. In August, it announced plans to sell the Austin American-Statesman to help pay off its debt.

In short, there is no doubt that all three companies, although they might very well make it through this deep recession, are in danger of bankruptcy.

"I see the potential for the companies to go under, but that does not mean the newspapers themselves will close," says Rick Edmonds, a media business analyst at the Poynter Institute, a journalism training center in St. Petersburg. "The more likely scenario is that someone will come in and run them and buy them at liquidation prices. But these are bigger companies, so they have more maneuvering room. There's a degree of hope there may not be for some of the smaller companies."

Asked if he had any concerns that the Herald might be sold in the next couple of years, Gyllenhaal says, "That's not something we're worried about."

Good thing, because there's more than enough to worry about already for the dailies of South Florida — and the people who read them.

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