Tribune files for Chapter 11 bankruptcy
LONDON - US newspaper publisher Tribune, which owns the Los Angeles Times, has filed for Chapter 11 bankruptcy after struggling under $13bn of debt, made worse by a huge drop in advertising revenue.
Tribune, which was taken private by real estate magnate Sam Zell in an $8.2bn buy-out last year, has been trying to unload its assets to ward off its creditors, hiring investment analysts over the weekend to sort out its options.
On Monday the company called for bankruptcy protection, making it the first major US publisher to take the dramatic step in today's weakened economy.
Chapter 11 will buy the company some time to put its finances in order before its next major debt payment of $512m is due in June.
However, Tribune has been struggling with an agreement put in place by the banks during the buy-out which states that the company's debt could not exceed profits by more than nine times.
Analysts predict the company will be forced to sell off some of its major holdings to stay afloat, warning that it will be a difficult task with the economy tanking and a lack of industry confidence.
As well as the LA Times, the company publishes the Chicago Tribune, the Baltimore Sun, the Sun Sentinel, the Orlando Sentinel in Florida and six other newspapers. It also owns 23 TV stations and a number of websites. It also owns the Chicago Cubs Major League baseball team and its stadium at Wrigley Field, although they are not included in the bankruptcy.
In May, Tribune sold the New York daily Newsday to Cablevision System for $650m in order to make a previous debt payment.
The company has made a number of staff cuts across all its newspaper titles and reduced page count with as many as 150 staff going at the LA Times.
CEO Sam Zell said in a statement: "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.
"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."
He said the company would continue operations, maintaining its employee payroll, benefits and retirement plans.
However, those who participated in the employee stock ownership plan could potentially see the value of their stock wiped out after bankruptcy courts relegate funds back to creditors, leaving nothing for the employees.
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