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Tuesday, September 26, 2000

Star-Bulletin closing after 117 years

Bulletin bidders
submit revised
purchase offers

A decision on a successful bidder
for the paper could come
as early as Friday

By Rick Daysog

At least three parties have submitted revised bids to purchase the Honolulu Star-Bulletin, meeting yesterday's court-imposed deadline.

Black Press Ltd. of Canada, Los Angeles-based Hadland Communications Inc., and a local group composed of Kauai businessman Jeff Lindner, former U.S. Rep. Cecil Heftel and Kauai publishers Peter and Jane McClaran all said they have submitted reworked offers for the 118-year-old afternoon daily.

The bidders declined to discuss details of their revised offers, which were submitted after each held private negotiations last week in Los Angeles with the Star-Bulletin's owner, Liberty Newspapers Limited Partnerships, and Gannett Co., which owns the Honolulu Advertiser. Gannett also owns the Hawaii Newspaper Agency, which runs the combined business operations of the two separately run newspapers.

Federal Magistrate Barry Kurren could rule as early as Friday on a successful bidder for the 63,000-circulation Star-Bulletin, which was put up for sale in April. The court-supervised sale has postponed antitrust lawsuits by the attorney general's office and a citizen's group to block Liberty's attempt to close the Star-Bulletin.

Last September, Liberty announced it would close the Star-Bulletin and end its joint operating agreement with Gannett. In return, Gannett was to pay Liberty $26 million.

Phil Murray, the Santa Fe, N.M., broker handling the sale of the afternoon daily, had no comment on the revised bids and declined to discuss the process by which the court would select a buyer.

But according to the terms of the April 2000 stipulation permitting the sale, the financial capability and expertise in running a stand-alone daily newspaper will play a key role in the judge's decision.

Although all three known bidders are looking to continue to operate the Star-Bulletin as an afternoon daily, their approaches to running the business, as well as their financial conditions, vary.

Here is a snapshot of the companies and what they are offering:

Bullet Hadland Communications, which operates five weekly newspapers in the Los Angeles area, is looking to expand the Star-Bulletin's circulation to about 100,000 and add about 200 employees to build up the business end of the newspaper.

Although the deal would require significant capital investment, company owner Steve Hadland believes he has the financial means to complete the deal and compete with the Advertiser. He said he has secured the financial backing of a Fresno, Calif.-based company, Growth Capital Corp.

A review of Hadland Communications and its related companies shows financial difficulties dating back to the early 1990s.

In 1994, the Los Angeles Times reported that the Internal Revenue Service seized a predecessor to the company, Coast Media Newspapers, for failing to pay more than $228,000 in back taxes dating to 1992. The IRS seizure forced the company to lay off all 50 employees and close nine weekly newspapers, according to the Times. He has since reopened some of those papers.

Since 1996, Hadland's business has been hit by several liens from the state of California for nonpayment of taxes totaling nearly $5,000. A printing company also obtained a $39,000 civil judgment against Hadland in 1997 in Los Angeles Superior Court over a printing bill dispute.

Although the tax liens were paid off in July of this year, the civil judgment has not been paid, according to Hadland.

Hadland blamed the financial difficulties on the economic downturn that devastated the Southern California economy in the early 1990s. The cutbacks in the aerospace industry, the 1992 Rodney King riot and the 1994 Northridge earthquake hit his business hard, which until then had been generating a slight profit on annual sales of about $4 million, he said.

Hadland, who said he was only a part-owner of the company at the time of the IRS seizure, noted that Coast Media was saddled with debts incurred by its former partners. Hadland said he has since bought back the company's assets from the IRS and has saved his newspapers from closing.

"We're in the business of saving newspapers. Sometimes it works, sometimes it doesn't," Hadland said. "You have to take the risks, and you have to take the lumps."

Bullet Black Press, which operates 80 community newspapers in western Canada and the Seattle area, is the largest operator among the bidders and appears to have the most ambitious plans for the Star-Bulletin.

David Black, the company's owner, said he would invest as much as $25 million and boost daily circulation to about 100,000 while adding more than 200 advertising, circulation and distribution jobs to the Star-Bulletin's editorial staff of 97.

Black would continue the Star-Bulletin as an afternoon daily and print the newspaper at the Kaneohe plant of RFD Publications Inc., publisher of Midweek. He also would add a Sunday edition to the newspaper's six-day-a-week coverage in a move to increase advertising revenues by 35 percent.

As for financing, Black said he would likely tap lines of credit with Toronto Dominion Bank and U.S. Bank in Washington state.

Bullet The Lindner-Heftel-McClaran proposal calls for a six-day-a-week afternoon newspaper. The group, which has held discussions with RFD Publications to print the newspaper, said it would scale back the editorial staff to about 61. The group said it did not expect to be in the black until the fifth year of operation.

To cover the losses, the group is requesting an $18 million subsidy from Gannett and would tap a $5 million investment from Lindner, who is a Kauai developer and a scion of the Lindner family of Cincinnati, which owns Chiquita Brands International Inc.

Both Gannett and Liberty have refused to grant any subsidies.

If no sales agreement is reached, the antitrust lawsuit against Gannett and Liberty would proceed.

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