• by Erik Sass  @eriksass1, January 16, 2009

As long expected, the Star Tribune of Minneapolis filed a Chapter 11 bankruptcy petition in the U.S. Bankruptcy Court in the Southern District of New York on Thursday, putting yet another American newspaper in the financial doghouse.

While executives at the Star Tribune tried to put the best face possible on the announcement, it's unclear how they will be able to salvage the newspaper, in light of its $400 million debt and revenue trends headed ever more steeply downward.

The Chapter 11 filing comes as no surprise, following several missed debt payments. Like other newspapers, the Star Tribune's owners--Avista Capital Partners--probably sought to renegotiate the terms governing their lending agreements with banks to avoid being declared in default. However, ever since the global credit crunch began last fall, banks have been increasingly unwilling to extend credit or restructure lending agreements to high-risk properties like newspapers.

In the Star Tribune's coverage of its own bankruptcy, publisher Chris Harte said: "We intend to use the Chapter 11 process to make this great Twin Cities institution stronger, leaner and more efficient so that it is well-positioned to benefit when economic conditions begin to improve."

Still, the sharp decline in print ad revenues, now accelerating thanks to the recession, will not leave much room for maneuvering, aside from more layoffs, now a staple of the industry.

In November, Harte sent employees a memo warning that "Star Tribune revenue in 2009 will be substantially lower than it was in 2008," adding: "We will have to cut much deeper, and many of the reductions we make will be painful."

But if the Star Tribune is like other mid-sized regional dailies that are on the rocks, it's unclear whether even drastic cutbacks can save it. Earlier this month, Hearst Corp. put the Seattle Post-Intelligencer up for sale, saying it will close the newspaper if it can't find a buyer in the next two months.

The Rocky Mountain News--one of two dailies serving the Denver metro area--will be closed if it does not find a buyer by mid-January, according to owner E.W. Scripps. The Star-Ledger, based in Newark, retreated from the precipice at the last second when union holdouts agreed to more layoffs. Also, Journal Register Co. said it may close up to 13 newspapers in Connecticut if it does not find buyers by Jan. 13.

Big newspaper companies themselves face bankruptcy and dissolution in the worsening economic climate. In December, the Tribune Co. filed for bankruptcy protection, indicating that it is unable to service its $13 billion debt under the terms originally agreed with lenders. Philadelphia Media Holdings, publisher of The Philadelphia Inquirer, defaulted in June, followed by The Journal Register Co. in July.