It’s been expected for months, even years now, but it finally happened today. The Star-Tribune filed for Chapter 11. The company has been a bruise on Avista Capital’s portfolio almost since firm plunked down $530 million for it two years ago. peHUB has covered the development, or rather, deterioration, of the investment pretty extensively here, here, here and here.
For non-subscribers, the gist of the coverage is that the deal was both a failed investment thesis and foolish capital structure. Avista entered a declining industry with vague plans for improvement and futile attempts to replace revenues lost from the most profitable parts of the newspapar—the classified ads. No matter how great Minneapolis’ demographics look (above average income, high literacy rates, high homeownership, growing population), no daily metro paper can magically avoid the macro-economic headwinds and service a sizeable debt load to boot.
Not to dismiss the magnitude of the mess, but this isn’t a mistake Avista is likely to make again. The firm’s other media holdings don’t look anything like The Star Tribune, which is good news as the firm markets its second fund. The vehicle seeks $3 billion and held a first close on around $1 billion last month.
One last thing on Avista: For a good Friday chuckle, check out this gem of a school newspaper story I stumbled upon called “Avista Capital Partners is the devil,” in which a student journalist concludes that owning a company in Wyoming, and basically anything related to the energy industry is akin to “festive picnics in Hades with Lucifer.” He then quotes John Lennon and declares a boycott on purchasing the paper. But he’ll read the online version. What?