Sun-Times Media investor K Capital in favor of dissident slate of director nominees

By Lisa Kerner

Charlotte, N.C., Dec. 18 - Sun-Times Media Group, Inc. shareholder K Capital Management, LLC said it was a "very easy decision" to sign the consent solicitation for the election of Davidson Kempner Capital Management LLC's nominees to Sun-Times' board of directors.

In a Dec. 17 letter to Sun-Times, K Capital said it believes board members Cyrus Freidheim and Herbert Denton want to stay on the board for the money.

Board fees from Sun-Times are Denton's primary source of income, creating a conflict of interest, K Capital said in the letter, which was included in a schedule 13D/A filed with the Securities and Exchange Commission.

K Capital, which owns 8.6 million Sun-Times shares, also took issue with Freidheim's lack of newspaper experience and his running of the company as chief executive officer, especially his "costly plan to expand the revenue base" begun in 2006 when "every other newspaper was shrinking."

According to K Capital, Davidson Kempner's nominees have more experience in financial restructuring and newspaper operations than the current board.

In addition, K Capital believes the proposed new board "provides a fresh set of eyes as opposed to the current board which must defend itself and justify years of poor performance and bad decisions."

As previously reported, Davidson Kempner wants to reduce the Chicago-based newspaper company's board to five directors from seven and put forth its own slate of director nominees that includes:

• Jeremy L. Halbreich, former president and general manager of the Dallas Morning News;

• Robert A. Schmitz, a partner at Quest Turnaround Advisors;

• Lee Hillman, former chief financial officer of Bally Entertainment Corp. and later the chairman and CEO of Bally Total Fitness Holding Corp.; and

• Michael E. Katzenstein, founder and principal of CXO, LLC, a restructuring and turnaround management firm.

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