Washington, Dec 9: It's now newspaper publisher hit by the global economic crisis. Media conglomerate Tribune Co., smothered by USD 13 billion in debt and weak prospects generating cash through advertising, it has become the first major US newspaper publisher to seek bankruptcy protection since the Internet began siphoning readers from traditional outlets.
The newspaper sought for protection yesterday, although its next major principal payment on the debt, of USD 593 million, isn't due until June, Tribune has been in danger of missing lender-imposed financial targets at year's end. Those targets are based on the level of Tribune's debt relative to its cash flow, and become harder to meet as revenue declines, even if the debt itself doesn't increase.
The privately held publisher of the Chicago Tribune and Los Angeles Times, which took on about $13 billion of debt when it went private last year under a deal led by real estate mogul Sam Zell, said in the filing that it had $7.6 billion in assets and $12.97 billion in debt as of Dec. 8.
Tribune said its unsecured creditors include J.P. Morgan Chase & Co's JPMorgan Chase Bank with $8.57 billion with a claim under a senior facility and Merrill Lynch & Co Inc's Merrill Lynch Capital Corp with a $1.6 billion claim under a bridge loan facility. Its equity holders include a Tribune employee stock ownership plan with 56.52 million shares.
The filing does not include Tribune's Chicago Cubs Major League Baseball team, or iconic Wrigley Field, where the Cubs play. Tribune has been trying to sell both.
Earlier in the day, a source briefed on the matter had told agencies that Tribune had hired investment bank Lazard Ltd to look at a possible bankruptcy filing even as the publisher and broadcaster talked with lenders to renegotiate its debt.
The filing said Tribune had retained Lazard and Alvarez & Marsal as financial advisers, and Sidley Austin and Cole Schotz Meisel, Forman & Leonard as legal counsel.
Tribune has been trying to sell off properties such as the Cubs to pay off debt. It had already sold the Newsday newspaper on New York's Long Island to Cablevision Systems Corp.
During the third quarter, Tribune also sold a 10 percent interest in online job site CareerBuilder to Gannett Co Inc for $135 million.
Analysts had said Tribune's biggest challenge was to avoid violating the lending terms, or "covenants," on what they estimated to be about $10 billion of guaranteed debt.
The company's cash flow might be insufficient to cover nearly $1 billion in interest payments due this year, and Tribune owes a $512 million debt payment in June. Tribune reported in November a third-quarter loss from continuing operations of $124 million, compared with a profit of $84 million in the same quarter a year ago.
Revenue fell 10 percent to $1 billion.
Tribune repaid $888 million in debt in the third quarter, with $218 million coming from another credit line. For the balance, it used money from the Newsday and CareerBuilder deals.