The company that owns the Los Angeles Times, Chicago Tribune and Chicago Cubs baseball team is preparing for a possible bankruptcy filing as it attempts to renegotiate $12 billion in debt with banks and other creditors, a Tribune Co. executive said Sunday.
The Chicago media conglomerate hired Lazard Ltd. a little more than a week ago for advice on a possible Chapter 11 filing, though people familiar with internal talks said the company was exploring several options.
A bankruptcy action is possible but not certain.
"We have a few more steps to go, maintaining all our options to do what's best for the company and all stakeholders, including employees," said the executive, who asked not to be named because he was not authorized to speak publicly about the matter.
Tribune and many other newspaper owners, already hurting from the migration of advertising revenue to the Internet, have suffered even bigger setbacks amid the broad economic downturn.
The financial slump also has hampered the company's attempts to sell assets, in particular the Cubs, at a premium price to help it cover accelerated debt payments next year.
"Revenue declines have been dramatically worse, even over the last couple of weeks. It's just really rough," said the Tribune executive. "A number of advertisers just don't have the money to spend right now.
"Some advertisers are still pushing to get through the holiday season, but when others look to cut discretionary spending, we are right at the top of the list," the executive said.
Tribune faces a deadline today on $70 million of unsecured debt from before real estate magnate Sam Zell took control last December in conjunction with an employee stock-ownership plan. A spokesman told the Chicago Tribune, however, that the company could use an existing line of credit to pay the bill.
A much bigger debt payment -- $512 million -- is due in June, and was to come from asset sales that now are hamstrung by the credit crunch. The company's general interest payments amount to about $1 billion a year, and it already has paid down its debt by that amount this year.
"Getting a deal done on the Cubs or on a number of other properties is extremely difficult. Other sources of capital and debt have been significantly hampered," the executive said. "Layer on that a business that has been in decline for years and a failing economy, and it's a perfect storm."
