Union votes to save Sun-Times, suburban papers

Union members tentatively approved contract concessions Wednesday with the goal of saving the Chicago Sun-Times, at least seven suburban dailies and dozens of weekly community newspapers.

Members from four out of the five units voting Wednesday night in Chicago agreed to an option to take a deeper pay cut, as much as 19 percent, in order to keep their benefits the same.

The agreement also gives any union members laid off within the first six months of the agreement, four more weeks of severance pay, up to eight weeks total, if they're not selected for layoffs by seniority.

Most of all, the union members voted to keep the legacy newspaper and its suburban chain alive.

"It's been tough. Our people have been making a lot of sacrifices," said Tom Thibeault, executive director of the Chicago Newspaper Guild. "It's been very hard, but people understand it needed to be done."

Chicago financier James Tyree has offered about $27 million to take over the newspaper company, but he had insisted employees take deep pay cuts and accept changes in severance and seniority rules. With Tyree's bid the only one in play, the company intends to ask the U.S. Bankruptcy Court to approve the sale today with its employee unions on board.

The sale would keep the venerable Sun-Times alive as a viable competitor to the Chicago Tribune, not to mention save about 50 community newspapers, including dailies in Aurora, Elgin, Joliet, Naperville, Waukegan and Gary, Ind.

The four units' votes in favor of the new deal were:

• Sun-Times, 89-29.

• Waukegan News-Sun, 11-5.

• Pioneer Press, 28-8.

• Joliet Herald-News 12-4.

• The Gary Post-Tribune is expected to vote Thursday.

Tyree, CEO of Mesirow Financial, originally sought a 15 percent permanent salary and benefits rollback, a freeze of pension funds and dramatically changing the rules on severance and seniority.

Now the employees can take the 15 percent cut in salary and benefits, or take more of a pay cut to keep the same benefits.

The new severance package boosts severances from four to eight weeks if layoffs out of order of seniority occur in the first 180 days of the agreement. After that, all severances would be capped at four weeks.

The bidding for the Sun-Times properties closed Monday in U.S. Bankruptcy Court without any other formal bids. Tyree is offering $5 million in cash and about $22 million in assumed debt and other liabilities.

Tyree told the Daily Herald Tuesday that he had provided a memorandum that had clarified some so-called misinterpretations of his earlier offers.

"There's been a whole lot of misinterpretations on what my requests have been," Tyree said. He declined to elaborate on what those were.

Tyree said he has remained consistent on his bid and on the concessions being sought from the company's union members.

Complicating the picture at the eleventh hour, Lisle equity manager Thane Ritchie issued a statement late Tuesday saying he had been blocked from bidding and promising to ask the bankruptcy court to extend the bidding process by 30 days. But after learning of the union's tentative agreement to Tyree's concessions, Ritchie's spokesman Justin Meise declined to comment until after the court hearing.

Ritchie has faced his own financial woes in recent years.

Two of his Ritchie Capital Management funds filed for bankruptcy protection in 2007 after they lost about $700 million related to an alleged fraud by then-partner Coventry First LLC. In 2008, the U.S. Securities and Exchange Commission filed a $40 million settlement with the firm, Ritchie and another employee for charges of illegal late trading schemes.

Also, a case is pending in Cook County Circuit Court where Barclay's Bank PLC filed a lawsuit in 2008 charging that Ritchie Capital concealed more than $150 million in investments with Petters Group Worldwide and its affiliates.

So why would an equity firm with its own legal battles, mounting bills and financial concerns want to buy Chicago's bankrupt No. 2 newspaper? Meise said it's because Ritchie wants to preserve such legacy newspapers like the Sun-Times.

He's also bidding on other struggling newspapers nationwide, but Meise wouldn't disclose which ones. In fact, Meise wouldn't disclose what a potential purchase price would be for the Sun-Times Media Group or even what Ritchie's assets are.

Reports show that Lisle-based Ritchie Capital Management, with offices in New York and California, had $4 billion in 2005, but dropped to about $2 billion in 2008.

So how did Ritchie's offer play into the union's decision to agree to concessions? Anything's possible, said newspaper analyst John Morton, president of Morton Research Inc. in Silver Springs, Md.

"The likely thing is the union had an unknown quantity and didn't know what Ritchie would do," said Morton. "They apparently have some confidence that the other bidder (Tyree) has the newspaper's best interest at heart."