Avista Wrote-Down 75% of Investment in 'Star Trib'

By: E&P Staff Avista Capital Partners, the owner of the Star Tribune in Minneapolis, wrote down 75% of its $100 million investment because of the deterioration in circulation and advertising revenue at the paper.

Avista purchased the Star Tribune for $530 million from the McClatchy Co. in December 2006.

Avista took the write-down at the end of 2007. In a memo, Avista Partners wrote: "In the past year, the newspaper industry has suffered greater than expected declines in circulation and advertising revenue, particularly in print classified advertising. The outlook in the near to medium term remains uncertain."

The Star Tribune's Neal St. Anthony reports that Avista borrowed $340 million to finance the purchase of the paper. Avista said that the Star Tribune's revenue dropped roughly $75 million between 2005 and 2007.

On Sunday, the New York Post reported that Avista had retained the services of the Blackstone Group to restructure its balance sheet.

Avista denied the Star Tribune is close to bankruptcy.

Several newspaper companies have been taking goodwill impairment charges over the past year, including McClatchy, which took a total write-down of $2.7 billion).

Goodwill is generally calculated by subtracting the worth of tangible assets of a business from the fair market value of the company. Goodwill consists of those intangible assets that would include a newspaper's brand and perceived strength in the market, something that must be evaluated at least annually to see if it has lost value.