The owner of the Chicago Sun-Times, a storied newspaper that once boasted legendary newsmen like Mike Royko, followed its rival into bankruptcy Tuesday -- raising questions about whether both can survive in a brutal time for two-newspaper towns.
The filing was widely seen as a step toward shutting down a feisty paper known for uncovering city scandals that once went as far as to secretly operate a bar to expose crooked city inspectors.
"We'd be surprised if they are publishing a print daily newspaper by the end of 2010," said Mike Simonton, a bond analyst at Fitch Ratings. "They've been on the clock for over a year now in terms of burning cash and not having really a viable revenue and cost structure to survive in this environment."
Sun-Times Media Group Inc., which also owns dozens of suburban newspapers, filed for Chapter 11 protection in a Delaware court -- the fifth newspaper publisher to seek protection from creditors in recent months. The company listed $479 million in assets and $801 million in debt. The largest unsecured creditors are newsprint vendors; three are owed more than $1 million each.
"Please be assured that this action does NOT mean the Company or our newspapers or online sites are going out of business," chairman and chief executive Jeremy Halbreich told readers in a statement posted on its newspapers' Web sites.
Halbreich even sounded an optimistic note, saying the filing would "stabilize our business and create a brighter future."
But the move comes in the bleakest of times for newspapers, as plummeting advertising revenues have forced closures and bankruptcies. In a matter of weeks, the Rocky Mountain News in Denver has closed its doors and the Seattle Post-Intelligencer has abandoned its print editions for online only.
Tribune Co., owner of the Chicago Tribune, Los Angeles Times and other newspapers and television stations, filed for bankruptcy protection in December. Analysts say it may not be long before Chicago becomes a one-newspaper city.
"I think the recent past suggests that it's very hard for two newspapers to make it in a town, even in a very big city like Chicago," said Rick Edmonds, media business analyst at the nonprofit Poynter Institute.
The Sun-Times faces not only factors plaguing newspapers nationwide, but its own unique history.
"Most papers have the double hit, classified ads leaking away plus the recession," Edmonds said. The Sun-Times has "the further disadvantage of their legal situation."
The situation stems from the days when Sun-Times Media Group was Hollinger International, led by former media mogul Conrad Black. Black went to prison in March 2008 after being convicted of fraud, but not before he and others siphoned off millions of dollars from the company -- something spokeswoman Tammy Chase referred to as Sun-Times Media's unique "legacy issues."
"The litigation costs of defending Mr. Black and other members of his management team was a huge financial drain on this company and we recouped virtually none of that," Chase said.
There are other costs associated with the Black era, including Sun-Times Media Group's agreement this month to pay $26.3 million to settle a legal dispute with a Canadian newspaper company.
And still hanging over the company is a bill of as much as $608 million the Internal Revenue Service says is owed in back taxes and penalties related to Black's business practices.
"We are appealing that," Chase said.
The IRS debt has hurt efforts to attract investors, Chase said, and was a key in not being able to sell the company last year. Settling that issue would make the company more attractive, as will restricting the company under Chapter 11, she said.
Simonton isn't so sure.
"Selling assets or finding investment ... was possible without being bankrupt and there were no bidders for assets or (any) capital providers lining up to make an infusion into this company," he said.
The Sun-Times' demise would not only mean closing the nation's 17th biggest paper as of September with a circulation of 313,000, but also the last chapter in a long and often colorful story.
Formed in a merger in 1948, the Sun-Times has its roots in the Chicago Evening Journal that began in 1844 -- making it the city's oldest continuously published daily. It was that paper, as one story goes, that put the blame of the Great Chicago Fire of 1871 on Mrs. O'Leary's cow.
Competition among the city's papers was immortalized in the 1928 play, "The Front Page." Years later, the competition between Gene Siskel and the Sun-Times' Roger Ebert turned movie criticism into a nationally watched contact sport.
Royko and Ann Landers worked at the Sun-Times. So did Bill Mauldin, who in 1963 drew the enduring editorial cartoon of the Abraham Lincoln statue from the Lincoln memorial grieving the assassination of President John F. Kennedy.
In 1977, the paper purchased an old tavern, named it the Mirage, staffed it with undercover reporters and photographers and documented the bribe demands of city inspectors for four months.
Losing one of the two papers in a city that once boasted about a dozen would be devastating for Chicago, said Michael Miner, a former Sun-Times staffer who covers local journalism for the Chicago Reader, a free weekly.
"Chicago likes to see itself as a big global city and big global cities don't have one newspaper, they have a ton," Miner said. "Paris, London, Madrid, they have a dozen titles there."
Miner said Chicago, where federal prosecutors just recently put one Illinois governor behind bars and have charged his successor with corruption and where scores of city officials have faced corruption charges, needs its two papers.
"Reporters compete against each other," he said. "If you are the only paper... stories don't get written and reported as aggressively."