The First To Fall: Tribune Co. Files For Bankruptcy
CHICAGO, IL (December 8, 2008) – It wasn't really a surprise; many reports over the weekend hinted at the fact that the Tribune Co. was so mired in debt and without the cash flow to support their loan payments that bankruptcy consultants had been hired. But today it actually happened: Tribune Company became the first major news publisher to seek bankruptcy protection since the Internet sent journalism into a nosedive, and the bottom fell out of print advertising, and the credit crunch closed in on newspapers who were living too close to the margins.
On Monday in a federal court in Delaware, the owners of 12 newspapers including the Los Angles Times, the Chicago Tribune, The Baltimore Sun, 23 television stations, the Chicago Cubs baseball team and their home stadium, Wrigley Field, filed for bankruptcy protection.
Despite slashing hundreds of jobs at their newspapers this year, and selling Long Island's Newsday to Cablevision for $650 million, and putting the Tribune-owned stakes in the Chicago Cubs and Wrigley Field up for sale, the company still faced $11.8 billion dollars in debt.
Most of the debt was created by the $8.3 billion buyout of the company by real estate baron Sam Zell in what was supposed to be a "bail out" a year ago.
Tribune Co. would have had to sell the Chicago Cubs buy the end of the year to avoid violating their loan agreements, a sale that became less and less likely with only a few weeks remaining in December.
As advertising revenue continued 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.
Over the weekend news began to break that Tribune was in serious trouble. The Wall Street Journal reported Sunday that Tribune had hired the bankruptcy consultants Lazard and the law firm of Sidley Austin and was negotiating with creditors over debt.
If Tribune could have sold the baseball team and stadium, they could have brought in as much as $1 billion dollars. Sale of the team and stadium by the end of the year were also conditions attached to some of Tribune's loans. But the tight credit market, as well as an insider trading federal investigation into Dallas Maverick's NBA team owner Mark Cuban – said to be the highest bidder for the Cubs and Wrigley – stalled the sale.
In today's court filing Tribune Co. said it had nearly $13 billion in debt and $7.6 billion in assets. Zell saddled the company with debt a year ago this month when he took Tribune Co. private and took on $8.3 billion in debt in the process. Zell made the Tribune purchase with borrowed money, The New York Times reported. In today's bankruptcy filing Tribune also listed a $69.6 million bond issue that was due to mature on Monday.
"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," Zell said in a statement today. "I remain committed to our company and our lenders," he said, and instructed Tribune Co. employees to carry on "as usual."
In internal Q&A for Tribune employees detailing the impact of today's bankruptcy filing unveiled bad news for former employees. The document said that all ongoing severance payments, deferred compensation, and other payments to former employees have been discontinued and are now subject to the bankruptcy court's proceedings.
The news site Gawker also reported that Tribune Co. still owes former Los Angeles Times CEO Mark Willes $11 million dollars.
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