Sam Zell’s uber-leveraged media and entertainment Tribune Co. (TXA), which owns eight major daily newspapers, including the Los Angeles Times, Chicago Tribune and Baltimore Sun, and a string of local TV stations — seems to be headed toward a possible filing for bankruptcy-court protection as soon as this week, according to Wall Street Journal.
In recent days, as Tribune continued talks with lenders to restructure its debt, the newspaper-and-television concern hired Lazard Ltd. as its financial adviser, as well as legal counsel for a possible trip through bankruptcy court, according to people familiar with the matter.
Tribune has been on wobbly footing since last December, when real-estate mogul Samuel Zell led a debt-backed deal to take the company private. Tribune so far has stayed ahead of its $12 billion in borrowings with the help of asset sales. Now, however, dwindling profits are tightening the noose.
The company’s cash flow may not be enough to cover nearly $1 billion in interest payments due this year, and Tribune owes a $512 million debt payment in June.
One of Tribune’s most pressing concerns: By the end of the year, the company is likely to be in violation of debt terms that limit borrowings to nine times its adjusted profits.
Apparently, Tribune’s inability to stop the bleeding in advertising revenue combined with an exceptionally difficult financial and economic environment is pushing the newspaper closer to default on billions of dollars in debt.
Tribune reported on Nov. 10 an 83% decline in operating profits to $37 million from $217 million on YoY basis for the three months ended Sept 28. Its operating revenues also decreased by posting a 10% decline, or $122 million, to $1 billion. Followed by a 67% decrease in operating cash flow to $90 million in the ’08 quarter from $268 million in the ’07 quarter.
S&P analyst Emile Courtney predicted Tribune’s forced bankruptcy since June. She told Bloomberg:
Zell’s Tribune Co., even with attempts to shore up the company’s cash by selling assets and debt, could face default by the end of the year. In the absence of additional asset sales, we think that it’s a possibility as early as December.
Update: DJ reports Tribune Co. has filed for Chapter 11 bankruptcy protection in Delaware. Chicago Cubs franchise, including Wrigley Field, are not part of the filing.
“Over the last year, we have made significant progress internally on transitioning Tribune into an entrepreneurial company that pursues innovation and stronger ways of serving our customers,” said Sam Zell, chairman and CEO of Tribune. “Unfortunately, at the same time, 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”.
We believe that this restructuring will bring the level of our debt in line with current economic realities, and will take pressure off our operations, so we can continue to work toward our vision of creating a sustainable, cutting-edge media company that is valued by our readers, viewers, and advertisers, and plays a vital role in the communities we serve. This restructuring focuses on our debt, not on our operations.
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