CHICAGO, IL (December 8, 2008) – The Tribune Co., the newspaper publishing and television broadcast company taken private by real estate mogul Sam Zell last year and saddled will billions in debt in the process, has hired a firm that specializes in taking large corporations through bankruptcy proceedings, the Wall Street Journal has reported.
The law firm Lazard and Sidley Austin Ltd., were hired to advise Tribune Co. on a possible Chapter 11 filing that could come as soon as this week, the Journal reported over the weekend.
The Tribune Co. is in danger of falling below the cash flow required in agreements with bondholders, The New York Times reported this morning.
A Tribune Co. spokesperson refused to comment.
Despite slashing hundreds of jobs at the Tribune-owned newspapers Los Angeles Times and the Chicago Tribune this year, and selling Long Island's Newsday to Comcast for $650 million, and putting the Tribune-owned stakes in the Chicago Cubs baseball team and Wrigley Field up for sale, the company still faces $11.8 billion dollars in debt. Most of the debt was created by the $8.3 billion buyout of the company by Zell a year ago.
Bloomberg News reports the Tribune Co. would have to sell the Chicago Cubs buy the end of the year to avoid violating their loan agreements, a sale that becomes less and less likely with only a few weeks remaining in December.
Sale of the Cubs and the stadium, which was expected to happen soon after the end of the baseball season, was delayed by both the credit crunch and by the personal financial problems of the highest bidder, Mark Cuban, owner of the Dallas Mavericks, who is currently the subject of a federal investigation on allegations of insider stock trading.
As advertising revenue continues to plunge in the final months of 2008, the Tribune Co. reported a third-quarter revenue loss of $121.6 million this year. The year saw their advertising sales drop 19 percent through September, losses bigger than the 15 percent drops in the first and second quarters of this year.
In bankruptcy, a judge has the power to void contracts, debts, and employees in order to keep a company alive. And the threat of a bankruptcy filing often forces creditors to restructure debt so that they don't get left empty-handed at the end of the process. With bankruptcy, some of the debt Zell could end up avoiding might also include taxes.
