Debt-Saddled Tribune Co. Files for Bankruptcy Protection

Media giant Tribune Co. yesterday became the first major newspaper or chain in several decades to enter Chapter 11 bankruptcy protection, as the debt-saddled company fights sharply dropping advertising revenue and an ongoing recession.

The move will allow Tribune to stay in business while it seeks better terms from its creditors. The company stressed that all of its businesses, which include eight major daily newspapers and 23 television stations, will continue their day-to-day operations while Tribune restructures its debt.

According to Tribune's bankruptcy filing in a Delaware court yesterday, the company has $12.9 billion in debt and $7.6 billion in assets.

Tribune's largest creditor is J.P. Morgan Chase, which is owed $8.6 billion. Merrill Lynch is second, at $1.6 billion, and Deutsche Bank is third, at $900 million.

Chicago-based Tribune owns properties in most of the nation's largest cities. Its holdings include the Chicago Tribune and Los Angeles Times; cable television superstation WGN in Chicago; the Baltimore Sun; and WDCW-50 in Washington, a CW affiliate. The company also owns Major League Baseball's Chicago Cubs and Wrigley Field, which are for sale and outside of bankruptcy protection.

Real estate mogul Sam Zell engineered an employee-owned transition of Tribune to private status in December 2007 with $8.2 billion in new loans, layering on top of the $5 billion in debt already being carried by the company. Even then, Tribune was reporting declining ad revenue and newspaper circulation.

This placed the company in a perilous position when the economic crisis and credit crunch exploded in late summer. Plummeting Tribune profits put the company in danger of being unable to meet its debt covenants, according to a source close to the company who spoke on condition of anonymity because Tribune is privately held.

"Their newspapers are profitable," newspaper analyst John Morton said. "But their profits have dropped so much and they're so heavily leveraged that they've been put in a hole."

Or, as Tribune said in a release yesterday: "We simply have too much debt."

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

To cut costs, Tribune has mandated hundreds of layoffs across the company. Those who did not take their severance in a lump sum could be hurt by the bankruptcy. "All ongoing severance payments, deferred compensation and other payments to former employees have been discontinued and will be the subject of later proceedings before the [bankruptcy] court," stated an internal Tribune document sent to employees yesterday.

The future of the employee stock-ownership plan is unclear, the company said.