"The focus of the filing today is 100% on relieving the pressure on the company from its debt," Zell told reporters. "By virtue of the filing today we will suspend making interest payments, which should give us added flexibility in order to continue moving forward."
The company has been considering the possible purchase of the Orange County Register and the San Diego Union-Tribune in an effort to consolidate the Southern California market for print and online advertising.
Zell did not address any acquisition talks with Register owner Freedom Communications Inc. or Copley Press Inc., which owns the Union-Tribune. In response to a question about those possible purchases, he said that strategically sound deals probably would be approved by the bankruptcy judge.
Despite their struggles, many newspapers remain profitable. Before the bankruptcy filing, the Los Angeles Times projected it would make $100 million this year, down from about $240 million two years ago.
And newspapers are rapidly gaining millions of new readers on the Internet, although the ad revenue from online news has not kept pace.
With Tribune now in bankruptcy protection, its creditors will have to decide whether they're willing to restructure the debt, as Zell hopes, or try to get at least some of their money back another way, such as by a sale of its assets.
A breakup seems unlikely, however. Even if buyers were to emerge for some of the company's media properties, financing such purchases could be a major stumbling block given that credit remains tight.
In many bankruptcies, creditors exchange debt for an ownership stake in the business, in the hope of eventually selling that stake at a profit. Barring a breakup of the company, the issue facing Tribune's creditors could come down to how much of a debt load to leave on the company's balance sheet and how much of an equity stake to demand.
Tribune directors approved the action to file Chapter 11 in a meeting Monday, just as a $70-million payment on a medium-term loan was coming due. Although Tribune had about $300 million cash on hand, more than enough to make the installment payment, executives had been trying to achieve a broad restructuring of its debt in conjunction with the payment.
Those efforts failed in part because economic conditions have made projecting the course of the company's revenue and earnings exceptionally difficult: Not only are projections of the length and depth of the recession hard to come by, but also the continuing credit crunch has injected uncertainty into even routine business transactions.
