NEW YORK -- The New York Daily News is venturing into uncharted waters now that it has become the first major newspaper to seek refuge under Chapter 11 of the federal bankruptcy code.
On one hand, analysts and bankruptcy specialists say, the risky strategy of last resort could shield the News from the crumbling Maxwell publishing empire's overseas woes and give the paper breathing room to recover or seek a buyer.
On the other, the bankruptcy filing could sink the troubled tabloid by scaring away advertisers and newsprint suppliers.
Yesterday's Chapter 11 filing "is new ground for a high-profile, major newspaper property," said John S. Reidy, media analyst for Smith Barney, Harris Upham & Co. in New York. "This will not help them with advertisers."
The paper's liabilities of $53.3 million far outstrip its assets of $37.4 million, according to the bankruptcy court filing.
Newsprint suppliers were by far the largest creditors, with Donahue Paper Co. owed $7.1 million, Quebec & Ontario Paper owed $5.5 million and Kruger Paper Co. due $3.2 million. None of those companies could be reached for comment.
The listing of liabilities did not include the estimated $35 million to$40 million in severance payments and closing costs for which the late Robert Maxwell assumed responsibility when he took control of the paper in March after a bitter five-month strike.
"The News is going to have to convince its advertisers that it's going to be there for the long haul, or it's going to have to find a buyer -- fast, before the value of the franchise deteriorates," said New York bankruptcy lawyer Alan Miller, a partner with Weil, Gotshal & Manges, who isn't involved in the News action.
But John Campi, vice president for promotion of the News, insisted that Maxwell's heirs have no intention of selling the newspaper. "Our projections show we'll be profitable next year," he said. "If the economy were somewhat decent, we'd be flying."
The Maxwell empire's other major U.S. holding, Macmillan Publishing Co., was not affected by the Daily News filing.