Big Investor Tells Sun-Times Group To Cut More, Pay Execs In Stock

By: Mark Fitzgerald Saying it was "extremely disappointed" with the collapse of the price of Sun-Times Media Group (STMG) shares this year, the company's second-largest shareholder on Tuesday demanded even deeper cost cuts at the Chicago-area newspaper publisher -- and that top executives should be paid in stock rather than in cash in 2008.

"Sun-Times should henceforth compensate the company's chairman, chief executive officer, and directors of the board entirely in equity compensation (i.e., no cash compensation)," the Boston-based K Capital Partners LLC Portfolio Manager Abner Kurtin said in the letter, which was filed with the Securities and Exchange Commission (SEC). "For each individual, the level of such compensation for 2008 should not exceed the level of that individual's 2007 total compensation."

The hedge fund owns a 9.8% stake in STMG, and has been harshly critical of the chain in the past. In August, K Capital urged STMG's board to sell the company.

In its filing Tuesday, K Capital also demanded STMG spend the remaining amount in its previously announced share repurchase program "extreme undervaluation of the current stock price." With about an hour left until the 4 p.m. EST trading close, STMG (NYSE: SVN) was trading at $1.18, up 3 cents, or 2.61%, from its open. Its 52-week high is $6.94.

"The remaining capacity in the share repurchase program only represents a small fraction of the company's current cash position, yet it would be substantially value enhancing to current shareholders if such capacity were used to repurchase shares," Kurtin wrote.

On the cost-cutting, K Capital said STMG should prepare a plan to announce publicly by Jan. 15, detailing "an explicit 2008 cost savings target, an explanation of the source of these savings, and the cash and non-cash expenses associated with the cost savings program ... and guidance for 2008 cash flow generation."

It was the second whack at STMG in two days. Just before he was sentenced to 6 1/2 years for fraud in the theft of millions from the company then known as Hollinger International, its former chairman, Conrad Black, told the judge he "deeply regretted" the loss of $1.8 billion in shareholder value "under my successors."