Out of ink: Tribune files Ch. 11
Zell cites 'perfect storm' of economic woes; N.Y. Times also feels pinchAyear after Tribune was taken private and the TV, sports and newspaper conglomerate proclaimed itself the largest employee-owned media company, it filed for bankruptcy protection.
Tribune said Monday that it filed for Chapter 11 because of pressures brought about by roughly $13 billion in debt but that its media operations would co ntinue uninterrupted.
The announcement came the same day that another storied newspaper company, the New York Times, said that it would borrow as much as $225 million against its headquarters, a 52-story building in the middle of Manhattan. The company owns 58% of that 1.5 million-square-foot tower.
Tribune and the New York Times — and news outlets across the country — are suffering from a recession that has advertisers reining in their spending. Those with large debt to service, like Tribune, are even more strained.
"Factors beyond our control have created a perfect storm — a precipitous decline in revenue and a tough economy coupled with a credit crisis that makes it extremely difficult to support our debt," Tribune chairman and CEO Sam Zell said.
The company — which owns such papers as the Los Angeles Times and Chicago Tribune, along with 23 TV stations — said that the bankruptcy does not include the Chicago Cubs or Wrigley Field, the baseball team's home stadium. Those assets are for sale, with Mark Cuban, owner of the NBA's Dallas Mavericks and a host of media assets, reportedly offering the top bid of about $1 billion.
Since Zell took control of Tribune, it has already sold off several assets, including a 10% stake in its CareerBulder.com for $135 million and its Newsday newspaper for about $600 million.
Zell and his investment group paid $34 a share for Tribune last December, nearly a 50% premium to the stock's 52-week-low back then. At the time, he promised "to create a fresh, entrepreneurial culture that is fast and nimble, and which rewards innovation."
He also added a host of new board members that included Jeffrey Berg, CEO of ICM.
Although a private company, Tribune still reports certain financial results for the benefit of bondholders. In its second quarter, it took a $3.84 billion charge to write down the value of its newspaper brands.
Tribune said it has repaid about $1 billion of its debt since going public last year and that it owes another $512 million payment in June. However, analysts have said that even if the company makes its payments on time, Tribune would violate some lending terms if its debt exceeds nine times its earnings before interest, taxes, depreciation and amortization. (partialdiff)