Tribune Co. files for Chapter 11 bankruptcy protection
The Chicago-based company, which owns the L.A. Times and KTLA Channel 5, will stop making interest payments on $12 billion in debt as it attempts to restructure its loans, chairman Sam Zell says.
The company that owns the Los Angeles Times, KTLA Channel 5 and the Chicago Tribune filed for bankruptcy protection today, seeking relief from $12 billion in debt that largely stems from last year's leveraged buyout of the media firm.
Tribune Co. directors approved the action to seek Chapter 11 protection in a meeting today, saying they want to restructure payments to banks and other creditors, following real estate magnate Sam Zell's purchase of the company last year.
"A precipitous decline in revenue and a tough economy have coupled with a credit crisis, making it extremely difficult to support our debt," Zell said in a statement to employees just before 11 a.m. Pacific time. "All of our major advertising categories have been dramatically impacted."
The Chicago-based company had roughly $300 million cash on hand, more than enough to make a $70-million payment due today. But executives reportedly were unable to persuade lenders to undertake a broader restructuring of the debt.
Among other obligations, a $512-million principal payment related to Zell's leveraged buyout is due in June.
Money for that payment was to come from asset sales, particularly the sale of the Chicago Cubs baseball franchise. That sale, originally expected to take place earlier this year, has been delayed in part because of the credit crisis and is now expected to take place in 2009.
Some analysts had previously set the value of the Cubs at more than $1 billion. Zell, the chairman and CEO of Tribune Co., said in his statement that the baseball franchise would not be part of the bankruptcy filing. He said in a conference call with Tribune Co. reporters that he expects a deal for the baseball club to be completed soon.
Tribune's debt has become more burdensome over the last six months as advertising revenue at its eight daily newspapers and 23 television stations has fallen sharply. Industry projections are for further declines over the next six months to a year.
The company said it plans to file in Delaware, where it is incorporated.
"The focus of the filing today is 100% on relieving the pressure on the company from its debt," Zell said in the interview with reporters from Tribune newspapers. "By virtue of the filing today we will suspend making interest payments, which should give us added flexibility in order to continue moving forward."
