Tribune media files bankruptcy
Company attempted to sell Cubs to meet debt payment
NEW YORK – Media conglomerate Tribune Co., smothered by $13 billion in debt and a drop in advertising, on Monday became the first major newspaper publisher to seek bankruptcy protection since the Internet sent the industry into a tailspin.
Most of the company’s debt comes from the complex transaction in which the company was taken over by real estate mogul Sam Zell last year. Although Tribune’s next major debt payment isn’t due until June, the company has been in danger of missing financial targets set by its lenders.
Other newspaper companies have also struggled with debts, but many have negotiated with lenders to ease their targets in exchange for higher interest rates.
“Tribune’s debt was so outsized and so disproportional to its cash flow compared to these other companies that it can be the sore thumb sticking out rather than an example of the industry,” said Ken Doctor, media analyst with Outsell Inc.
The Tribune owns the Chicago Cubs baseball franchise, as well as the Los Angeles Times, Chicago Tribune, the Sun of Baltimore, the Hartford (Conn.) Courant, six other daily newspapers and 23 television stations.
While Tribune had planned to meet its obligations with lenders by reaping income from its various properties, the recession has led consumers and advertisers to severely cut spending this year, exacerbating pressures the industry already was facing because of the migration of readers to the Internet.
To make a debt payment this year, Tribune sold the Long Island daily Newsday to Cablevision Systems Corp. for $650 million.
To generate additional cash – and meet the next debt payment of $593 million, due in June – Chicago-based Tribune has been looking to sell the Cubs, Chicago’s storied Wrigley Field and the company’s 25 percent stake in a regional sports cable channel. But a tight credit market has made it tougher for potential buyers to obtain loans.
“So, how did we get here? It has been, to say the least, the perfect storm,” Zell wrote in a memo to employees. “A precipitous decline in revenue and a tough economy have coupled with a credit crisis, making it extremely difficult to support our debt. All of our major advertising categories have been dramatically impacted.”
Monday’s filing, made in bankruptcy court in Delaware, could give Tribune time to raise cash by waiting until the credit market eases to sell off assets. It also could put additional pressure on its lenders to ease the financial targets that Tribune must meet.
The company entered court protection with $13 billion in debt and $7.6 billion in assets.