The Seattle Times Co. has long billed itself as "fiercely independent, locally owned," a newspaper company in charge of its own destiny. But at least some of the struggling company's major business decisions, at newspapers in Maine, now are being overseen by out-of-town bankers.
The Times Co. first raised that possibility last month in a lawsuit it filed in federal court in Portland, Maine, against a newspaper union there. The lawsuit warns that the Times Co. faces "the dire consequences of being in default" on bank debt if it cannot sell the Blethen Maine Newspapers chain, and that it can't interest a buyer if continuation of the union contract is part of a deal.
Dire consequences seem to be now the case. Last Friday, July 18, Blethen Maine Chief Executive Charles Cochrane, citing the Times Co.'s "fragile financial situation," told Portland Press-Herald and Sunday Maine Telegram staffers in a memo that the company plans another round of layoffs at the paper — the fourth in the past 12 months. The paper's editor says that will affect about 10 percent of 85 remaining newsroom jobs. "In order to meet our commitments to our debt holders," Cochrane's note said, Blethen Maine's flagship needs to cut operating expenses by $1.2 million more this year.
Union officials said Blethen Maine executives told them at a meeting Friday that the company has to slash Maine payroll by more than 30 jobs to avoid defaulting on Times Co. loans, which come due in September. The Times Co. cut 31 jobs at the paper on July 1. The Seattle Times Co. also owns the Kennebec Journal in Augusta and the Morning Sentinel in Waterville, as well as MaineToday.com.
It wasn't the first the Maine union has heard of the Seattle company's precarious position with lenders. According to two officials of the Portland Newspaper Guild, officials at the Times Co.'s Maine subsidiary have told them in previous meetings that the company's bankers are now requiring the Times Co. to clear spending decisions with lenders.
Kathy Munroe, the union's acting administrative officer, told Crosscut that a senior Blethen Maine executive told her in a meeting last month that the company had to get approval from bankers before offering severance payments to 25 of the Press Herald staffers laid off this month. Munroe said Robert Bickler, general manager of the Blethen Maine chain, said the Times Co. could not offer the severance agreement until its was approved by a bank consortium holding the Times Co.'s debt.
"They made it clear they had to get the banks' nod to get the money," Munroe said.
The Times Co. borrowed $230 million in 1998 to purchase three Maine dailies and a Web site. Since then, the company has struggled with that debt, defaulting twice as its fortunes, along with those of the entire newspaper industry, have declined.
At another meeting about the layoffs at Blethen Maine's Portland Press Herald headquarters on July 2, the heads of the chain's human resources and labor relations departments reiterated to Munroe and another union official, C.J. Betit, that the chain could not authorize a staff buyout without the banks' approval. "They weren't sure they could do the buyout," Betit said, "without first getting permission from the bank."
The Seattle Times Co. is 50.5 percent controlled by the Seattle-area Blethen family, with Sacramento-based McClatchy — a similarly strapped though much bigger chain — owning the other 49.5 percent. The Times Co. is privately held and does not disclose financial information. A spokesperson did not respond to Crosscut's request for comment on the company's financial status. A spokesperson for Bank of New York Mellon, which took over last year as lead lender of the bank group holding the Times debt, said the bank doesn't comment on the details of loans.
The prospect of Times Co. bankers calling the financial shots in Maine could resonate on this side of the country, too. The company is negotiating this summer with three unions, The Newspaper Guild and two Teamsters units. The Seattle Times contract with the Guild expires today, and the union wants more money. The Teamsters also have contract talks pending and are fighting Times Co. cost-cutting efforts that include outsourcing 70 company trucking jobs. Bankers in the background could affect those talks greatly.
"Clearly," says newspaper industry financial analyst John Morton, "when you are close to default almost anything a company does could require them to have to confer with their bankers."
As worrisome for newspaper readers in Seattle is whether those bankers will let the Times Co. invest in continuing technology improvements at the time they're needed most. Hearst, for example, which through the Seattle Post-Intelligencer is the Times Co.'s partner in a joint operating agreement, is putting serious money behind a Palo Alto, Calif.-based effort called FirstPaper, to develop a new digital delivery device.
Instead, the banks might keep pressing the Times Co. to raise more cash, perhaps through sale of more assets, while the value of those assets shrinks. In addition to the Maine papers and The Seattle Times, the Seattle Times Co. owns in Washington the Yakima Herald-Republic, the Walla Walla Union-Bulletin, three weeklies, NWsource.com, real estate including the company's headquarters in Seattle's South Lake Union neighborhood, and Rotary Offset Press in Kent, Wash.
Assuming it can pacify the union in Maine, the Times Co. might be lucky to recoup a small fraction of the $230 million Maine purchase a decade ago.
A worst case for the Blethen family would be the need to sell the entire company. Through a longstanding agreement, New York-based Hearst has first right to bid on the family's Seattle Times Co. stake. CEO and Seattle Times Publisher Frank Blethen has vowed in recent years never to sell the company but also has left open the possibility of doing just that. For the Times Co., that decision may now rest as much with bankers as with the Blethens.
