Debt-Ridden Tribune Co. Considers Bankruptcy

By Frank Ahrens
Washington Post Staff Writer
Monday, December 8, 2008

Media giant Tribune Co., saddled with billions in debt since it became a privately held company last year, has hired bankruptcy advisers, according to its flagship newspaper, the Chicago Tribune.

The Chicago-based company owns a coast-to-coast empire with television stations and newspapers in most of the nation's largest cities. Its holdings include the Los Angeles Times; cable television super-station WGN in Chicago; the Baltimore Sun; and WDCW-50 in Washington, the CW affiliate. The company even owns the Chicago Cubs.

Tribune assumed some $13 billion in debt when real estate mogul Sam Zell engineered an employee-owned transition to private ownership one year ago this month. Hopes were high among employees that the company could be re-engineered to be a news company of the 21st century.

But sharply dropping advertising revenue, a decline that has hit almost all of the nation's newspapers in recent years, has put the company in danger of being unable to meet its debt covenants and may force it to seek the shelter of bankruptcy reorganization, according to a source close to the company who spoke on the condition of anonymity because Tribune is privately held.

The company has hired investment bank Lazard and law firm Sidley Austin to examine the company's options, according to an article on the Tribune's Web site.

Bankruptcy, however, may not be the endgame for Tribune: Some creditors feel that newspapers forced into bankruptcy protection have even less chance of repaying their loans.

In November, the company reported a $124 million third-quarter loss, compared with an $84 million profit in the same period of last year.

Tribune is on the hook for about $1 billion per year in loan repayments. The company is eyeing a big payment in June 2009, which had worried analysts.

Tribune declined to comment for this article but directed inquiries to the Chicago Tribune article, which was posted online Sunday evening.

Further darkening Tribune's picture is the ongoing financial crisis. Analysts forecast a dim 2009 for all media companies dependent on advertising from retailers who are likely to cut back on ad and marketing spending or simply be forced out of business. Newspapers also depend on help-wanted ads, which shrink as unemployment rises.

Venerable newspaper chain Knight Ridder was swallowed in June 2006 by rival chain McClatchy Co., which has since watched its stock price lose 90 percent of its value. Over the same period, shares of The New York Times Co. are down more than 60 percent, while shares of The Washington Post Co. are down more than 40 percent.

Tribune has been raising cash by putting assets up for sale. The Cubs and their storied Wrigley Field are on the block and the company hopes for a spring sale, with an expected price tag of several hundred million dollars. However, the pool of potential bidders has shrunk since the team went on the market, as the credit crisis has put financing in doubt for such a large deal.

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