Paper Losses: Tribune Slips into Chap. 11

Sam Zell-owned operator of the Chicago Trib, L.A. Times, and Baltimore Sun, still plans separate sale of the Cubs and Wrigley Field.
Stephen Taub and Roy HarrisDecember 8, 2008

Tribune Co. didn’t surprise anyone with today’s filing for protection under Chapter 11 of the U.S. Bankruptcy Code. But the numbers behind it made headline news: a whopping $13 billion of debt one year after Sam Zell’s $8.2-billion purchase of the media giant.

As expected, he kept two Tribune properties — the Chicago Cubs franchise and Wrigley Field — out of the petition as Zell continues to try selling the fable sports team and stadium separately.

Tribune faced a deadline Monday on $70 million of unsecured debt it took on before Zell’s deal, according to its flagship Chicago Tribune. The Associated Press noted that the next major principal payment — $593 million — isn’t due until June. Tribune said in its bankruptcy filing that it has just $7.6 billion in assets.

Since going private last year, Tribune has repaid about $1 billion of its senior credit facility.

“We simply have too much debt in light of the dramatic and unexpected decline in revenues, which has been amplified by the current recession,” the company said. “All of our major advertising categories have been dramatically impacted.”

Zell, the chairman and CEO of Tribune who likes to call himself “the grave dancer” for his savvy purchases of distressed assets, asserted that the restructuring will bring the level of the company’s debt “in line with current economic realities.” Among the newspaper tombstones in today’s filing are the Los Angeles Times and the Baltimore Sun. It sold its Bethpage, N.Y., newspaper Newsday earlier this year to Cablevision Systems Corp. for $630 million. Tribune also owns stakes in such operations as cable-TV’s Food Network channel.

Tribune, which has 20,000 employees, filed for Delaware court approval of various customary first-day motions including: maintaining employee payroll and health benefits; fulfillment of certain pre-filing obligations; continuation of the Tribune’s cash-management system; and the ability to honor all customer programs. The company anticipates its motions will be approved in the next few days.

According to the AP, Tribune’s biggest unsecured creditors are its lenders, led by JPMorgan Chase Bank and Merrill Lynch Capital Corp. The wire service noted that JPMorgan is the administrator of $8.57 billion in senior debt and holder of about $1.05 billion of that. Others include Deutsche Bank AG, investment management firm Angelo Gordon & Co. LP, hedge fund Highland Capital Management LP, and Goldman Sachs Group Inc.

Barclays Capital Inc., which bought some assets from Lehman Brothers Holdings Inc., is also among Tribune’s creditors, with about $142.9 million in interest rate swaps. Media-related creditors include Warner Bros. Television, which is owed $23.7 million; Twentieth Television Inc., $8.1 million; Buena Vista Entertainment Inc., $6.2 million, and NBC Universal Domestic Television $4.9 million.