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Shrinking Sun-Times Faces Delisting

In a stark example of the fading fortunes of the newspaper industry, the company's market cap and shareholders' equity is now below NYSE's listing standards.
Stephen Taub, CFO.com | US
April 10, 2008

Sun-Times Media Group, publisher of some of the country's largest newspapers including the venerable Chicago Sun-Times, has dwindled in value to the point where it is in danger of being delisted from the New York Stock Exchange.

The company has fallen out of compliance with New York Stock Exchange listing standards. For one, over a consecutive 30-trading-day period its average market capitalization was less than $75 million. And its most recently reported shareholders' equity was also below $75 million.

Under NYSE procedures, Sun-Times has 45 days from its receipt of the notice, which was dated April 4, to submit a plan demonstrating its ability to achieve compliance with the listing standards within 18 months. Sun-Times said it expects to submit such a plan.

For the 2007 calendar year, Sun-Times had revenue of $372.3 million and an operating loss of $140.2 million. The company, formerly known as Hollinger International, switched to its current name in 2006. It owns more than 100 newspapers.

The company announced in February that its board of directors had begun to evaluate "strategic alternatives to enhance shareholder value." These include joint ventures or strategic partnerships with third parties, and/or the sale of the company or any or all of its assets. It has retained Lazard Frères & Co. LLC as its advisor.

Another key goal is finding ways to reduce costs due to declining advertising revenue. "Integral to this effort is the evaluation and implementation of appropriate outsourcing arrangements," the company said in a recent regulatory filing. It also said it will continue to adjust headcount in all areas as required by changes in the business.

Newsprint and production costs have been minimized through reductions in page sizes and balancing of editorial versus advertising content, SunTimes noted.

In late March, Hollinger agreed to pay more than $21 million to settle a Securities and Exchange Commission complaint over its role in an alleged deceptive scheme to divert cash and assets from Hollinger, which is now called Sun-Times Media Group.

In March the company agreed, without admitting or denying guilt, to forfeit $16.55 million in alleged non-competition payments received by Hollinger, plus prejudgment interest of more than $4.7 million. The SEC said $21.3 million paid to Hollinger International to satisfy a judgment against Hollinger Inc., a Canadian corporation and the controlling shareholder of Sun-Times Media, will be credited toward the disgorgement in this action.

The SEC filed its action against Hollinger Inc., former CEO Conrad Black, and former deputy chairman F. David Radler in 2004, alleging they fraudulently diverted assets through a series of related-party transactions from 1999 through 2003.

Radler settled with the SEC in March 2007 without admitting or denying the charges. Once the publisher of the Chicago Sun-Times and a former business partner of Black, he agreed to pay about $23.7 million in disgorgement and prejudgment interest and a $5 million civil penalty and to be barred from serving as an officer or director of a public company.

Black was convicted in a criminal trial last summer and in December was sentenced to 6.5 years in prison.




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